Fannie Cuts ARM Servicing Fee

Fannie Mae has reduced its minimum servicing fee on adjustable-rate mortgages to 25 basis points and it is willing to go to a lower fee on a negotiated basis.

The secondary market agency dropped its minimum ARM servicing fee from 37.5 bp to 25 bp, effective Jan. 1.

A Fannie Mae spokesman said the cost of servicing ARMs has come down to the level of fixed-rate mortgages, which have a 25 bp MSF. The reduction in the MSF also gives lenders more "flexibility" in issuing mortgage-backed securities, he said.

"This change to the minimum required servicing fee will be effective for adjustable-rate mortgages in MBS pools with issue dates and whole loan commitments dated on or after Jan. 1, 2006," a Fannie seller/servicer announcement says.

Freddie Mac established a 25 bp MSF on ARMs securities back in March 2004.

Fannie also indicated it may be willing to cut the minimum ARM servicing fee to 12.5 bp for high-quality servicers.

"On a negotiated basis, the minimum servicing fee on certain adjustable-rate mortgages may be reduced to a level below 25 bp," according to Fannie announcement 05-08.

The announcement also said the 12.5 bp MSF on uniform hybrid ARMs will remain in effect for 2006.

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