By early July the Federal Housing Finance Agency is expected to release its long-awaited proposal on changing servicing compensation, offering the industry three initial options, according to servicing advisors close to the matter.
The three options that the industry will get to comment on involve restructuring the servicing payment from the current 25 basis point minimum to one where just three to five basis points are offered, a 12.5 basis point payment and a flat fee paid to the servicer of $7 to $10 per month per loan.
Although this was the way the situation looked late last week, sources said it’s always possible that the proposal could even be pushed back to late in the summer near Labor Day.
An FHFA spokeswoman declined to comment on specifics, and pointed to recent remarks made by acting agency director Ed DeMarco who said in a speech, “At an appropriate time later this year, we will seek public comment on a more detailed proposal.”
The change in servicing compensation would only apply to loans serviced for Fannie Mae and Freddie Mac.
It’s unclear what change, if any, would apply to mortgages packaged into Government National Mortgage Association securities.
As reported by National Mortgage News, Fannie Mae continues to push for a drastic cut in the compensation fee with Freddie and Ginnie Mae leaning toward to change at all.
One advisor who was in a meeting with Fannie on the issue last fall called the get-together “contentious,” noting that the GSE is adamant on making some type of change to its servicing fee structure.
He said lately Fannie has softened its stance but not by much. (Fannie has declined to comment on the matter.)
At this time it’s expected that the FHFA will not make any specific recommendations itself and instead would play the role of mediator, offering these three proposals.
It would then gather industry comments, which would shape some type of compensation change that would be presented in mid-2012 at the earliest. Even then, no change may occur.
In a recent note to its servicing clients, United Capital Markets, Denver, said, “The good news is that the discussion seems to have taken an introspective turn with more and more participants on both sides of the issue, from GSEs to mortgage servicers, now saying that we need to have a more thoughtful debate, including leaving the MSF (minimum service fee) where it is.”
