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While the long-standing 25-basis point fee structure could be altered in any number of ways, it's likely that the changes would reduce the value of servicing rights.
January 11 -
When the Federal Housing Finance Agency announced its interest last week in overhauling how servicers are paid, it didn't provide much in the way of public detail. But particulars are starting to trickle out from discussions Fannie Mae and Freddie Mac have held with various constituencies.
January 26 -
On the eve of a House Financial Services Committee vote to shut down President Obama's foreclosure prevention programs, Republicans challenged the administration to justify them.
March 2 -
Industry observers said it was clear why Republicans had chosen to move forward quickly on the foreclosure-prevention programs, arguing it fit in with their overall focus on reducing the deficit.
March 3
Seeking a Delay
The Mortgage Bankers Association wants to delay a final decision that is expected this summer on revamping residential mortgage servicing fees.
In a
"The change to the servicing fee impacts far more than mere compensation," Courson wrote. "It affects counterparty risk, servicing values, tax policy, representations and warranties, prepayment speeds and rights to the asset."
In January, the FHFA said it planned to overhaul how mortgage servicers are paid, and Fannie Mae and Freddie Mac officials laid out four possible changes to the current 0.25% servicing fee at an MBA summit
Courson said the current GSE proposals raised far more questions than answers. "MBA has not yet heard any discussion with regard to the 'default servicing fee,' which is a substantial component to evaluating the impact of changing the current 25-basis-point servicing fee," the letter said. "When would the 'default servicing fee' be triggered — at 30, 60 or 90 days delinquency? What is the appropriate amount of fee for each stage? How will the payment be structured, as a flat fee or by specific service? Will the servicing of defaulted loans transfer to a third party? What impact will this have on the guarantee fee structure currently in place?"
Others in the industry have questioned the need for a change in servicer compensation. They say servicing problems are primarily because of the overwhelming volume of nonperforming loans that were themselves caused by poor underwriting, not the current fee structure.
Proactive Borrower
After being rejected for a loan modification, Carla Ghosn decided to build a website that would tell borrowers if they qualified for the government's Home Affordable Modification Program.
The site, www.mycaal.com, lets borrowers find out if they qualify by entering information on their loan and household income. For $98, it calculates the front-end and back-end debt-to-income ratios and does a loan mod analysis based on the Treasury Department's guidelines.
"I got frustrated with the process and I wanted to understand why I had been rejected," said Ghosn, a former sales manager at Marvell Semiconductor in Silicon Valley, who got input in creating the site from a former client, Jateen Parekh, a designer of Amazon's Kindle.
Ghosn said she was "totally unprepared" the first time she applied for a modification early last year. After analyzing the process, Ghosn applied again and was accepted. "The site tells you all the steps in the process," she said. "I wanted a company to help me, but I couldn't find one where you plug in your numbers and it tells you whether you are qualified or not."
