Magazine article American Banker

Trade Groups Request End to Limits on Use of Servicing as Capital

Magazine article American Banker

Trade Groups Request End to Limits on Use of Servicing as Capital

Article excerpt

The government should eliminate restrictions on the use of mortgage and credit card servicing assets to meet capital requirements, industry officials wrote in comment letters filed last week.

The American Bankers Association, the Mortgage Bankers Association of America, the Missouri Bankers Association, and others complained that a July plan from the federal banking and thrift agencies to double the share of these assets that a bank or thrift may count as regulatory capital is inadequate.

They also criticized a separate provision that would continue barring a bank from counting more than 90% of the value of individual mortgage and credit card servicing assets toward capital.

The limitations add costs and hamper the growth of asset-backed securitizations, they argued. Servicing assets consist of income derived from administering loans that have been sold to investors.

"The proposal places banking institutions at a competitive disadvantage versus financial institutions that are not subject to the same regulations," wrote Paul V. Salfi, senior financial policy analyst at the ABA.

Similarly, most balked at the agencies' plan to continue excluding auto loans and similar nonmortgage-servicing assets from capital because regulators consider them hard to value.

"The financial asset securitization and servicing markets have matured during the past several years and are now able to reflect more accurately the value of servicing assets," wrote Joseph L. …

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