The Independent Community Bankers of America is very wary about new servicing requirements and servicing compensation structures being discussed that according to them could harm the servicing operations of community banks.
Servicing is a low margin business and current fees are "only enough to cover costs," said Jack Hartings, president and chief executive of Peoples Bank Co., Coldwater, Ohio.
One Federal Housing Finance Agency proposal would significantly reduce Fannie Mae and Freddie Mac servicing fees on performing loans and increase fees for servicing of nonperforming loans.
"This would be unfair to community banks that predominately service performing loans," Hartings told the Senate Banking Committee on Tuesday, and it would "remove an incentive for diligent servicing that keeps loans current."
The Ohio community banker also raised concerns about on-going negotiations between state attorneys general and large banks that could produce a settlement requiring corrective actions to improve servicing and foreclosure practices.
If this settlement were applied to all banks, "it would cause many community banks to exit the mortgage servicing business and accelerate consolidation of the servicing industry, leaving it to the largest-too-big-to-fail lenders," Hartings warned.
