We continue to find the analytics that suggest systemic risk resulting from the mortgage-servicing debacle to be unpersuasive, especially in light of the Fed’s new stress test.  However, politics trumps analytics.  Statements and testimony at this week’s hearings strongly suggest that the FSOC will turn on servicing and declare it in whole or part to be systemic.  This would have far-reaching implications for servicing firms, as well as for the GSEs.

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