How 'Little Guys' View Slashing Of Minimum Service Fee
So, what do the little guys of the mortgage industry think about the government sponsored enterprises slashing their minimum servicing fee to 12.5 basis points?
Ed Burger, whose firm, Midwest Loan Services of Houghton, Mich., services or subservices loans for about 100 credit unions, likes the idea and would like to see it happen-sooner rather than later.
Burger, president of MLS, believes if the minimum servicing fee were cut from the current 25 basis points, more credit unions, in theory, would become mortgage lenders. "A lot of credit unions shy away from mortgages, or holding mortgages because they don't want to deal with the (mortgage servicing rights) risk," he said. "They don't want to worry about hedging it."
According to Burger many credit unions-but not all -ell their loan servicing released into the secondary market. "They sell the rights but they want to maintain the customer relationship."
The servicing executive noted that credit unions, as a group, have not really become involved in the issue.
A spokesperson for the Credit Union National Association said he was unaware of the topic and what it meant for credit unions.
A few weeks ago the Mortgage Bankers Association held a private forum on the issue with attendees offering differing opinions on whether Fannie Mae and Freddie Mac should cut their servicing fee minimum. The trade group has asked those who attended the conference not to discuss it with the media. Some large seller/servicers such as Countrywide and Washington Mutual favor a cut while others, such as Wells Fargo Home Mortgage, are against it.
In regard to the meeting, Steve O'Connor, vice president of government affairs for MBA, would only say that "a number of people support the cut, a number of people want to maintain the status quo, and a number are undecided."
Burger said he did not attend the MBA forum. His company, MLS, was founded back in 1992. It specializes in the origination, servicing and subservicing of residential loans for the credit union industry. The firm services about $2.5 billion in loans-about half of it GSE product. "The rest is private portfolio mortgages for credit unions."
Its average cost to service a loan is $70 a year, he said. "It's a good quality portfolio we have," he said. "We make money at it."