Forcing FHA servicers to transfer their servicing could have “ripple effects” in terms of the value of mortgage servicing assets and the servicers standing with Ginnie Mae, according to attorneys at K&L Gates.
The Federal Housing Administration recently revealed that it is seeking
“Right now, we are seeking power from Congress to be able to force FHA servicers to transfer servicing if we believe they are not doing an adequate job,” HUD secretary Shaun Donovan said last week.
“In many cases that transfer can be a positive thing,” the secretary said, and “result in better outcomes for the homeowners.”
K&L Gates partner Larry Platt noted that it is one thing to transfer servicing because of violations of a law or regulation. It is another thing if it is a performance issue.
Who will want to pay money for FHA servicing, if you can lose the asset simply because the borrowers don’t perform,” he told NMN.
If the servicer has to sell the servicing quickly like a distressed asset or it is taken away, it could also lead to a default under the Ginnie Mae servicing agreement.
The K&L Gates attorney raised these issues in a June 21 article published by the law firm.
“We would hope that any proposed legislation in this area would not authorize FHA to impair valuable mortgage servicing rights without, at a minimum, building in robust due process protections and standards of materiality and material adverse effect,” the article says.
