The nation's premier mortgage trade group believes the current servicing compensation regime doesn't work anymore and is exploring different options on behalf of the industry.
Wednesday evening, after the trade group ended an all-day conference on the future of servicing, MBA president John Courson declared that, "We're going to restructure the economics of mortgage servicing and that's huge."
For the past 50 years, servicers have been compensated out of the interest rate "strip" on a mortgage. The standard servicing fee on Fannie Mae and Freddie Mac loans is 25 basis points per unit.
"The current model doesn't work in times like this" he said noting that the housing and mortgage downturn has "put a lot of risk on servicers' balance sheets."
The MBA chief told National Mortgage News that MBA is considering a "fee for service" approach along with other options.
The trade group has selected 25 members to serve on its Residential Mortgage Servicing Council, which will meet via teleconference or face-to-face at least every other week until the end of March to address key issues such as foreclosure, loss mitigation and servicer compensation. The group will then formulate recommendations.
There is no timetable at this point and the recommendations may not be issued all at one time. Courson said that by mid-March he wants to "take the temperature to see where we are."
In the meantime, he sees no reason why federal regulators should "rush" and insert servicing standards into a risk retention rule that becomes effective April 17. (For complete analysis of the servicing fee issue see the Monday, January 24 edition of NMN.)
