NCUA Chairman Todd M. Harper Statement on Mortgage Servicing Assets Final Rule

As Prepared for Delivery on December 16, 2021

Thank you for your presentation, John, Tom, and Ian, and for your hard work in bringing this final rule before the NCUA Board today. 

As many may remember, I voted against the notice of proposed rulemaking on mortgage servicing rights when it came before the NCUA Board late last year. I stated, at the time, that I was not necessarily signaling my opposition to a potential final rule. Instead, if the final rule contained appropriate and substantive guardrails to mitigate the inherent risks found in mortgage servicing, I would support it. 

Long ago, my parents — and my more recent experiences on Capitol Hill — taught me that negotiating in good faith, with an open mind and open communications, leads to better decision-making and, ultimately, better governance. That is what we have achieved here today. 

After working with my fellow Board Members, we have developed a final rule that strikes an appropriate balance. This final rule will allow federal credit unions to purchase mortgage servicing assets from other federally insured credit unions, while also installing proper safeguards to mitigate the potential risks associated with this line of business. As such, I will vote in favor of this final rule.

I want to thank Vice Chairman Hauptman and his Senior Policy Advisor, Sarah Bang, and Board Member Hood and his Senior Policy Advisor, Lenwood Brooks, for working with my office to address these issues and develop a final rule we can all support.

There are many inherent risks associated with mortgage servicing, such as legal, interest-rate, compliance, operational, and liquidity risk, just to name a few. Credit unions engaging in this business must clearly understand the risks involved and implement internal controls and other structures to manage and mitigate such risks.

As such, under the final rule, federal credit unions with a CAMELS composite rating of 1 or 2, including a management component rating of 1 or 2, may purchase the mortgage servicing rights of loans from other federally insured credit unions, provided that:

• the underlying mortgage loans of the assets are loans the federal credit union is otherwise empowered to grant;
• the purchase will be made in accordance with the federal credit union’s written policies that address the risk found in these investments and servicing practices; and
• the federal credit union’s board of directors or investment committee approves the purchase in advance.

Before recognizing others, I have just one question for John. In this final rule, we did not include specific regulatory requirements for what constitutes an effective mortgage servicing compliance management system. Instead, we will be reviewing compliance management systems through the supervisory process. What will examiners be looking for in compliance management systems and will they have more time in risk-focused exams to sufficiently assess the effectiveness of such systems in protecting consumers?

Again, I thank my Board colleagues for their willingness to work with me. The result is a final rule that contains appropriate safeguards to protect consumers and manage the potential risks associated with these operations. It also provides federal credit unions greater flexibility to manage and diversify their existing mortgage servicing business lines.

That concludes my remarks. I now recognize Vice Chairman Hauptman.