To Reduce MSR Fees or Not, That is the Question

The debate over overhauling servicing compensation continues. Should the GSEs trim the 25 basis point minimum or not? One industry veteran wrote to us recently, noting this: “In regard to reduced fees, the servicing industry has recently proven that they cannot manage mortgage portfolios and staff appropriately and make a profit given the current fee levels. How can they possibly do it when reducing their fees by 80%? The end result will be a push for further consolidation (economies-of-scale) and proliferation of other customer fees for which there is presently significant consumer and regulatory pushback.” He adds that, “As far as consolidation [is concerned], each of the acquisitions I’ve been involved with (Far West Savings, Great American Savings, ITT Mortgage, American Savings, The Money Store, PNC Mortgage, Dime Savings, Fleet Mortgage, Homeside Mortgage, etc.) have been due to either banks failing or entities getting out of the mortgage business due to a lack of growth/profitability or a good fit with their base business lines.”