Do Nonbank Mortgage Companies Pose Systemic Risk to the US Economy?

Abstract

This working paper reviews the work of the Financial Stability Oversight Council (FSOC) in terms of identifying potential systemic risk in the nonbank sector under authority from the Dodd-Frank Wall Street Reform Act of 2010. We discuss past efforts by the agencies represented within the FSOC to impose capital requirements on nonbank financial institutions such as insurers, mortgage lenders and servicers. The FSOC Annual Report issued in 2019 is then reviewed and assessed. Finally, recommendations are made to assist the FSOC in better understanding the systemic risks, if any, posed by nonbank companies engaged in lending and loan servicing.

Keywords: mortgage lending, mortgage servicing, nonbanks, FSOC, Federal Reserve, MetLife, systemic risk, mortgage servicing rights, banks

JEL Classification: G00, G20, G23, G32, G33, G38, K2, K23, M2, M48, N2