Overview
- One forthcoming proposal would end deductions of mortgage servicing assets from regulatory capital while retaining a 250% risk weight, with feedback sought on the appropriate level.
- A separate proposal would make capital requirements for residential mortgages more risk-sensitive by tying risk weights to loan-to-value ratios rather than using a single standard.
- Bowman said past calibration pushed origination and servicing from banks to nonbanks, raising consumer protection concerns and citing stronger forbearance by bank servicers during COVID.
- She cautioned that mortgage servicing rights have volatile valuations and said only banks with sufficient expertise and hedging capacity should hold them.
- The Mortgage Bankers Association welcomed the direction and said it will participate actively in the formal notice-and-comment process.