Supervisors Symposium

NONBANKS WITH CAPITAL BELOW THE GINNIE MAE THRESHOLD IN 2018

BELOW-THRESHOLD FIRMS PROVIDE LIQUIDITY TO MSR MARKET

BELOW-THRESHOLD FIRMS PERFORM KEY ROLE IN SERVICING OPERATIONS

Below- threshold

Above- threshold

10 15 20 25 30 35 40

34

Total UPB serviced

$1,704B $2,241B

14

13

Total UPB sub-serviced Number of firms

$892B

$58B

3

0 5

MSRs / Assets, 2018:Q4 MSR purchases, 2017-18 / Assets, 2016:Q4 Below-threshold Above-threshold

13

87

FINAL THOUGHTS

• Crucial to ensure that nonbanks have enough capital and liquidity to withstand a wave of defaults – and to not contribute to defaults • Although nonbank mortgage companies are currently flush with cash, their financial situation will likely worsen as mortgage refinancing subsides • MSRs are more risky than cash, and capital regulation of nonbanks should account that fact • MSRs are poorly understood, and the necessary data to analyze their vulnerabilities are not available • The operational aspects of servicing are concentrated in a handful of companies with significant MSR holdings