November 19, 2025

State regulators are continuing their oversight expansion of nonbank mortgage servicers via the Prudential Standards first issued by the Conference of State Bank Supervisors (“CSBS”) in July 2021. The model framework outlines capital, liquidity, and governance requirements to strengthen the stability of large nonbank servicers. As of this year, CSBS and multiple state agencies are advancing adoption efforts to integrate these standards into state-level regulation. Nonbank servicers may soon face capital and operational oversight similar to bank-regulated institutions.

The framework applies to servicers that manage 2,000 or more loans and operate in two (2) or more states. It sets baseline expectations for capital ratios, liquidity planning, and risk management to ensure continuity of servicing during periods of market stress. State regulators are evaluating how these requirements align with the Federal Housing Finance Agency’s eligibility standards for Fannie Mae and Freddie Mac counterparties. Servicers should consider the evaluation of internal controls, liquidity buffers, and governance structures now to confirm readiness as oversight expands.