Agencies Clash Over How to Create Federal Servicing Standards
By Cheyenne Hopkins
If the Federal Deposit Insurance Corp. has its way, federal regulators would not wait for Congress to create national servicing standards, but instead write such rules as part of risk retention guidelines set to be released soon. The agency’s idea has divided the banking agencies, with the Federal Reserve Board and Office of the Comptroller of the Currency arguing risk retention is not the place for new servicing standards. But FDIC officials said that with all the problems in the servicing industry, regulators must act now. Ellen Harnick, senior policy counsel for the Center for Responsible Lending, said several problems could be addressed immediately, including conflicts of interests between servicers and various investors, different interests among the classes of investors, and confusion of servicer authority to modify loans. But Karen Shaw Petrou, managing director of Federal Financial Analytics, said risk retention rules wouldn’t cover all mortgages. “Not all mortgages are securitized and servicing is a significant issue,” she said. “I thought their goal was to do a broader set of national servicing standards whether securitized or not and do that through other provisions of Dodd-Frank.” She said that regulators could pursue servicing standards in other rulemakings, including proposals governing systemically risky activity or settlement and clearing activities.