The continuing stress within the housing and mortgage finance industries has generated significantly greater risks for mortgage lenders and servicers. Beyond significant credit risks, which for many have caused measurable deterioration in earnings and capital over the past two years, lie potentially major risks arising from:
- Mortgage repurchase obligations;
- Asset resolution efforts;
- Regulatory and legal scrutiny; and
- Financial statement disclosures.
In many respects, the heightened risks are not new. However, due to the increased financial and social sensitivities arising from record mortgage delinquencies and defaults, all parties along the continuum of mortgage lending and servicing have elevated their efforts to enforce their rights, real or perceived, to the fullest extent. Mortgage lenders and servicers are being faced with financial and operating challenges that demand the most disciplined internal controls and operational execution.