CFPB Issues Report on Mortgage Servicers, Exploring the Role Servicers of Different Sizes Play in the Mortgage Market

The Consumer Financial Protection Bureau (CFPB) recently released a report examining the differences between large and small mortgage servicers and exploring the role that servicers of different sizes play in the mortgage market where size is defined by the number of loans serviced.

“To the extent that large and small servicers have different resources, capabilities, customer bases, and business models, they will be affected differently by consumer finance regulations,” the report says. “This makes it important for the Bureau to better understand the ways in which mortgage servicers are the same and different.”

The report looks specifically at three size categories of mortgage servicers, based on loans serviced as of September 30, 2018. It classifies as “small servicers” those with 5,000 or fewer loans, “mid-size servicers” those with between 5,000 and 30,000 loans, and “large servicers” those with more than 30,000 loans.

Among the report’s key findings are that loans serviced by small servicers are less likely to be government-backed, with only five percent of small servicer loans insured by the U.S. Federal Housing Administration or guaranteed by the Department of Veterans Affairs, Farm Service Agency, or Rural Housing Servicers. In the large and mid-size categories, these loans account for more than 25 percent of loans serviced.

Mortgages at small servicers are also less likely to be serviced on behalf of Government-sponsored enterprises like Fannie Mae or Freddie Mac. While one-third of conventional loans are serviced for these enterprises at small servicers, that number rises to more than three-quarters at large servicers. Small servicers also see a greater share of mortgages for homes in non-metro or rural areas.  

Finally, borrowers with mortgages at small servicers report that “having an established banking relationship” and “having a local office or branch nearby” were important factors to their decision. 74 percent of small servicer borrowers indicated that having a nearby branch was important, compared to 44 percent of borrowers with accounts at large servicers.

Read the full report at https://files.consumerfinance.gov/f/documents/cfpb_2019-servicer-size-mortgage-market_report.pdf.