New Paper Challenges FSOC on Servicers

Jan 15, 2020

Whalen Global Advisors has published a new working paper that questions the findings of the 2019 Annual Report by the Financial Stability Oversight Council (FSOC) in regard to mortgage servicing companies.

The new paper, entitled "Do Non-Bank Mortgage Companies Pose Systemic Risk to the US Economy?," challenges the FSOC’s assertion that the financial system could undergo tumult if “if delinquency rates rise or nonbanks otherwise experience solvency or liquidity strains.” The paper also points to an FSOC observation that “widespread defaults or financial difficulties among nonbank mortgage companies could result in a decline in mortgage credit availability among these borrowers.”

The paper criticizes the FSOC, claiming that it fails to present a proper analysis to support its statements regarding non-bank mortgage servicers.

“We think that the FSOC report is alarming and badly mischaracterizes the mortgage servicing sector and the risks to commercial banks which provide liquidity to our industry,” said Richard Christopher Whalen, the paper’s author and president of Whalen Global Advisors. “Simply stated, there is no risk to the U.S. financial markets or the U.S. economy from mortgage servicers. The 2019 FSOC report is badly considered and, frankly, an embarrassment to the U.S. Treasury, which chairs the FSOC.”

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Phil Hall

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Jan 15, 2020

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