The CFPB recently released a report from its Office of Research examining the differences between large and small mortgage servicers, exploring quantitative evidence on differences between servicers of different sizes and the characteristics of borrowers whose loans they service. According to the report, such evidence can provide greater insight into developments in the mortgage market as well as how the CFPB’s rules may impact different size servicers.
The report explores the role servicers of different sizes play in the mortgage market, defining size by the number of loans serviced. The report considers servicers in three size categories, based on mortgage loans serviced as of September 30, 2018: (i) “small servicers,” which service 5,000 or fewer loans; (ii) “mid-size servicers,” which service between 5,000 and 30,000 loans; and (iii) “large servicers,” which service more than 30,000 loans. Underlying data for the report comes from a number of sources, such as the National Mortgage Database (NMDB) and the National Survey of Mortgage Originations (NSMO).
As identified by the CFPB, key findings in the report include, among other things, that: (i) a mortgage loan serviced by a small servicer is less likely to be a government-backed (non-conventional) loan, or serviced on behalf of Fannie Mae or Freddie Mac (the GSEs), than a mortgage loan serviced by a larger servicer; (ii) having an established banking relationship and a local office/branch nearby were important factors to borrowers with mortgages at small servicers when choosing a lender or broker, with 70 and 74 percent of borrowers with mortgages at small servicers (versus 53 and 44 percent at large servicers) saying that prior banking relationships and having a local branch or office was important in how they chose their mortgage lender, respectively; (iii) while delinquency rates on loans at all servicers increased considerably beginning in 2008, peak delinquency rates were much lower for loans at small servicers as compared to loans at large and mid-size servicers; and (iv) smaller servicers, as compared to mid-size and large servicers, have a greater share of mortgages in non-metro or completely rural counties, with small servicers servicing the majority of loans in many rural counties in the United States.