Subprime-Mortgage Servicing Regulation and the Financial Crisis

Scholars are attempting to fully understand all the causes of the 2007-09 U.S. financial crisis, hoping their efforts will ensure that something like this will not happen again. Nonetheless, in this research, weaknesses in mortgage servicing regulation have been largely ignored. Servicers collect payments from homeowners, keep records of mortgage balances, pool the payments and remit them to investors, and manage escrow accounts. In a world where mortgage assets are securitized, mortgage servicing is essential to the functioning of the financial system. Investors in mortgage-backed securities routinely expect that the servicer of the underlying loans will keep accurate records, and … Read more