Treating a Nonbank Like a Bank: New Proposed Prudential Standards for Nonbank Mortgage Servicers

Should US state nonbank mortgage servicers be subject to “safety and soundness” standards of the type imposed by federal law on insured depository institutions, even though the nonbanks do not solicit and hold customer funds in federally insured deposit accounts or pose a direct risk of a government bailout? Well, state mortgage banking regulators think so. On September 29, 2020, the Conference of State Bank Supervisors, an organization made up of state regulators, released proposed prudential standards for state oversight of nonbank mortgage servicers. This Legal Update provides background and further detail on the proposal.