Report to the Congress on the Effect of Capital Rules on Mortgage Servicing Assets
Print- Preface
- Executive Summary
- Background
- Risks to Firms Holding Mortgage Servicing Assets
- Role of Mortgage Servicing Assets in Bank Failures
- Regulatory Approaches for Mortgage Servicing Assets
- Evolution of the Mortgage Servicing Market since 1998
- Potential Impact of the Revised Capital Rule on the Mortgage Servicing Business
- Potential Impact of the Revised Capital Rule on Nonbanks
- Mortgage Servicing Assets Outside of the United States
- Analyses on Impact of the Revised Capital Rule
- Recommendations for Legislative or Regulatory Actions
- Appendix
Mortgage Servicing Assets Outside of the United States
The fact that MSAs are prominent in the United States reflects the U.S. approach to mortgage finance. Approximately 65 percent of first-lien mortgages in the United States are held in securities guaranteed by a GSE or Ginnie Mae.115 As discussed earlier in this report, the fact that the GSEs and Ginnie Mae do not service the mortgages in their securitized pools necessitates a separate market for MSAs.
Other countries, however, have adopted mortgage finance systems that do not create a considerable volume of MSAs.116 In particular, most non-U.S. countries use covered bonds rather than securitizations to support their mortgage finance system. Covered bonds are debt instruments primarily issued by banks and secured by dedicated collateral such as mortgages. With a covered bond, however, the pool of assets covering the bond remains on the issuer's balance sheet and the issuance of the bond does not create a separate MSA. In discussions with supervisory authorities from other countries, they noted that their supervised firms have negligible ratios of MSAs to CET1 capital. These supervisors noted that these amounts were likely attributable to the U.S. operations of their supervised banks, or were legacy amounts associated with acquisitions.
References
115. Statistic calculated from table L.218 of the Financial Accounts of the United States as the sum of lines 18 and 19 (GSEs and Agency- and GSE-backed mortgage pools) divided by (line 1, total liabilities, minus line 23, home equity loans). Return to text
116. The International Financial Reporting Standards, which are the accounting standards for the consolidated financial statements of all companies whose securities trade in a regulated market in the European Union, accommodates the creation of an MSA. Return to text
