Rethinking Servicing Compensation
An Inside Mortgage Finance Webinar Held
Tuesday, November 1, 2011
A proposal that could significantly reshape the economic and competitive landscape of the mortgage industry has been unveiled by the Federal Housing Finance Agency. It offers two alternatives for mortgage servicing compensation on future Fannie Mae and Freddie Mac business, and could well become the standard for all loans going forward.
Listen to this important webinar where key agency executives dissected the proposed plans that are now out for public comment. One option involves relatively modest changes to the current servicing model, such as the establishment of a reserve account and a reduced minimum servicing fee. The reserve would offset unexpectedly high servicing costs resulting from unusual market conditions. Servicers with superior performance would get a partial or full refund of this reserve account.
The second proposal would represent a fairly dramatic change to the current servicing approach and replace it with a fee-for-service structure involving a base servicing fee for performing loans. The FHFA said this approach is “an attempt to more accurately reflect the interests of the borrower, the servicer and the investor/guarantor/trustee, and the specific activities the servicer performs.” Compensation would be tied to the number of loans being serviced.
Get the recording of this important event to learn the details of these plans.
These Experts Shared Their Insights and Answered Questions:
- Mario Ugoletti, Special Advisor, Office of the Director, FHFA
- Michael P. Chen-Young, VP Strategic Analytics, Fannie Mae
- Mark D. Hanson, VP of Securitization and Cash Execution, Freddie Mac
- Kathleen M Gibbons, Senior Advisor for MBS Policy and Program Development, Ginnie Mae
- Guy D. Cecala, Publisher, Inside Mortgage Finance (moderator)
- Effects on the TBA market
- How the reserve account would be funded.
- What effect these plans would have on competition in the marketplace.
- How will excess interest-only cash flows be managed?
- What effect would changes have on gain-on-sale income?
- What standards would be applied to delinquent loans?
- The proposal likely to reduce the volatility of MSRs.
- The non-agency market effects.
- Factors in play in the creation of standardized PSAs.
- Benefits of bifurcating representations and warranties.