Regulators Screwing Up Mortgages Big Time

Mortgage and banking regulators have a job to do: keep our financial institutions safe from fraud, mismanagement and chicanery. But where in their mandate does it say: Hey, let's make things even tougher for them. What am I talking about? Answer: mortgage servicing. From what we're told, it appears that the Federal Housing Financial Agency – with extreme prodding from Fannie Mae – may be hell bent on forcing through a regulation that mandates “fee for service” only, throwing out the window the current 25 basis point minimum servicing fee. We caution that all of this is preliminary, but initial reports have not been positive. Meanwhile, pending Basel III rules cap how much MSRs can count toward core capital. Many mortgage industry veterans are infuriated by what they see as the demonization of the servicing business. As one servicing advisor told us: “The housing crisis was caused by subprime lending – not servicing.” Here's something else to consider: would a 'fee for service' structure have prevented robosignings – or caused more of it?