FHFA sets capital standards for non-bank mortgage market

The US Federal Housing Finance Agency – which is behind government mortgage guarantee giants, Freddie Mac and Fannie Mae – has outlined proposed new minimum eligibility criteria for non-bank sellers or servicers of mortgages from its entities.

The agency said the move was not regulation of alternative lenders, adding that the Conference of State Bank Supervisors was looking at enhancing state-level regulations for non-bank mortgage servicers.

Though the agency is not a regulator, the federal lenders have a large share of the US mortgage market. Many alternative lenders will need to comply with the new rules.

FHFA has proposed a minimum net worth of $2.5 million plus 25 basis points of the unpaid balance of loans serviced. The suggested minimum capital ratio is tangible net worth to total assets of greater than six percent. And minimum liquidity ratios must meet two measures – 3.5 basis points of agency mortgages serviced (Fannie, Freddie and Ginnie Mae) plus an extra 200 basis points of non-performing agency loans over the six percent total.

The agency will consult with the industry and make final recommendations on the minimum financial requirements in the second quarter of this year. The thresholds will come into effect six months later, the statement said.

Non-bank lenders have made huge inroads into the US residential mortgage market since the financial crisis, making up almost a quarter of the market in the first half of 2014, according to data gathered by Inside Mortgage Finance.

A spokesperson for alternative mortgage provider Nationstar declined to comment on the impact of the rules but said: “Nationstar is in full compliance with the proposed standards with significant cushion.”