“Washington’s effort to push banks out of the mortgage-servicing business is propelling the handling of customers’ loans into companies such as hedge funds and nonbank financial firms.

“The shift is fueling concern among federal and state regulators about the level of oversight and capital requirements in the industries now servicing a growing share of these loans.

“Banks such as Morgan Stanley, Bank of America Corp., Goldman Sachs Group Inc. and Ally Financial Inc., have been selling mortgage-servicing rights to nonbank companies, including Ocwen Financial Corp. OCN +0.78% , and Nationstar Mortgage Holdings Inc., NSM -0.67% which have doubled their servicing portfolios in the past year.

“About $1.03 trillion of mortgage-servicing rights were sold in 2013, with the vast majority going to nonbank firms, said Guy Cecala, publisher and chief executive officer of industry newsletter Inside Mortgage Finance. Among the 30 largest mortgage servicers, nonbank firms held a 17% market share at the end of 2013, up from 9% at the end of 2012 and 6% at the end of 2011.:

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Read full Wall Street Journal article here.