U.S. Banks to Trim Mortgage Servicing Ops as Tougher Regulation Looms (BAC) (C) (JPM)
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According to the Financial Times Friday, increased oversight by the Consumer Financial Protection Bureau (CFPB) -- created with the passage of Dodd-Frank -- will have many banks limiting mortgage servicing operations as compliance costs continue to creep higher.
The CFPB was created to limit the amount of "robosigning" banks were doing. Robosigning involves agents who process foreclosure filings without examining the underlying paperwork first.
Institutions like Bank of America (NYSE: BAC), JPMorgan (NYSE: JPM), Citigroup (NYSE: C), and others, reported lower contracts being held by home loan servicers in quarterly filings last month. The FT notes BofA cut its portfolio by 8 percent, with plans of more reductions, JPMorgan reduced contracts by 9 percent, and Citi by 19 percent.
Of the U.S.'s major banks, only Wells Fargo (NYSE: WFC) said its contracts rose in the quarter.
With Wells Fargo grabbing more market share, the CFPB's grip on mortgage operations will increase. Prior to the CFPB, regulators simply focused on banks' mortgage servicing income, rather than how borrowers were treated. Now the CFPB will also interview borrowers to claim to have been harmed by mortgage servicers.
On the costs associated with heightened regulation, JPMorgan is said to have recorded $2.3 billion in losses over the last four quarters for its mortgage servicing unit. BofA, has increased the amount of workers dedicated to handling delinquent borrowers from 10,000 at the end of 2008 to about 42,000. BofA was one of the top targets accused of robosigning in 2010 through now.
The CFPB was created to limit the amount of "robosigning" banks were doing. Robosigning involves agents who process foreclosure filings without examining the underlying paperwork first.
Institutions like Bank of America (NYSE: BAC), JPMorgan (NYSE: JPM), Citigroup (NYSE: C), and others, reported lower contracts being held by home loan servicers in quarterly filings last month. The FT notes BofA cut its portfolio by 8 percent, with plans of more reductions, JPMorgan reduced contracts by 9 percent, and Citi by 19 percent.
Of the U.S.'s major banks, only Wells Fargo (NYSE: WFC) said its contracts rose in the quarter.
With Wells Fargo grabbing more market share, the CFPB's grip on mortgage operations will increase. Prior to the CFPB, regulators simply focused on banks' mortgage servicing income, rather than how borrowers were treated. Now the CFPB will also interview borrowers to claim to have been harmed by mortgage servicers.
On the costs associated with heightened regulation, JPMorgan is said to have recorded $2.3 billion in losses over the last four quarters for its mortgage servicing unit. BofA, has increased the amount of workers dedicated to handling delinquent borrowers from 10,000 at the end of 2008 to about 42,000. BofA was one of the top targets accused of robosigning in 2010 through now.
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