The Federal Housing Administration is working on a new servicer scorecard and mortgage bankers are afraid it will be used to penalize servicers with high redefault rates.
The scorecard will measure servicer performance in terms of foreclosure prevention, loss mitigation engagement, default monitoring reporting and redefaults, according to the Mortgage Bankers Association.
“It is expected that the new scorecard will become a vehicle to determine loss mitigation incentives and treble damages for failing to engage in loss mitigation,” according to testimony MBA president and chief executive David Stevens submitted to the Senate Banking Committee on Thursday.
“Also we are concerned that the new scorecard will provide, for the first time, a vehicle to impose treble damages for reporting issues and issues outside of the servicer’s controls (such as redefaults) rather than on servicers’ efforts to offer loss mitigation,” according to the MBA statement.
The trade group indicates that HUD will have to go through a rulemaking process before the new
However, the impact of the changes will go beyond servicing, MBA warns. “The changes will result in the need for additional overlays in origination to reduce the risk of default, which in turn will reduce originations to FHA.”
