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19 Feb 14 Companies Returning to Mortgage Servicing in the US

The private mortgage sector is making a come back. After a 5-year hiatus, many mortgage companies are taking some risks with servicing residential mortgage liens. The game is different and the rules have changed but the servicing sector seems to have new life again.

The former senior adviser at the Consumer Financial Protection Bureau, Chris Haspel helped develop new mortgage rules aimed at preventing a rerun of the non-prime boom. Now, he is part of a growing industry seeking to profit from making loans that fall outside the new “qualified mortgage” regulation he helped author.

Many of the largest lending companies in the United States have said they do not intend to originate or securitize high numbers of non-qualified-mortgages, raising fears that home financing credit could soon dry up for millions of Americans. At the same time, a crop of new non-bank lenders are stepping in to fill what they see as a gap left by retreating banks

The new QM standard is expected to be followed next month by the “qualified residential mortgage” rule which aims to better align the incentives of those who slice-and-dice loans into mortgage bonds with the interests of the investors who buy the securities. The rule is expected to follow broadly the same criteria set out by the QM rules and will probably exempt the financial entities that create, or “sponsor,” securitisations of QM loans from having to hold on to a slice of the deal. That means securitizers of non-qualified mortgages will probably have to hold a piece of the resulting bond. For banks, already beset by new capital rules, that is an onerous requirement and one that is likely to deter them from bundling non-QM loans.

Props to the Financial Times 

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