WSJ: The New Face of the Mortgage Market

The mortgage market has shifted markedly, with non-banks comprising more and more of the responsibility for servicing loans and new companies, like hedge funds, getting into the business, writes the Wall Street Journal in a report titled “Mortgage Market Gets Reshuffled.”

But the infrastructure for overseeing the non-bank entities is lacking, and regulators have recently raised concerns over their rapid growth and market presence. 

Most recently, New York banking regulator Benjamin Lawsky voiced concerns over both Ocwen’s and Nationstar’s ramping up of mortgage servicing rights. And more entrants are getting into the business without any more mechanisms to regulate them, the WSJ writes. 

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“As banks scale back, other firms are stepping in: Structured Portfolio Management, LLC, a hedge fund, recently told investors it plans to get into the mortgage-servicing business by running its own company, said people familiar with the decision. Another hedge fund, Premium Point Investments LP, has started a separate arm to buy whole loans, bundle and sell them and retain the servicing rights even after they are sold,” the Wall Street Journal writes. 

The non-bank and private companies gaining share in the business may not be ideal from the standpoint of governing them, sources told the WSJ, but someone has to service the loans. 

“This whole business was obliterated by the government, and there’s a lot of money in it,” Rael Gorelick, partner at Gorelick Brothers Capital LLC, Charlotte, N.C., told the Wall Street Journal. “…I can’t imagine the government would be excited to have a hedge fund backer, but that said, the banks are being forced out. Someone has to do this.”

Written by Elizabeth Ecker

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