Magazine article American Banker

FHFA Backing Away from Radical Servicing-Fee Changes

Magazine article American Banker

FHFA Backing Away from Radical Servicing-Fee Changes

Article excerpt

Byline: Paul Muolo, Jeff Horwitz

The Federal Housing Finance Agency is preparing to back away from a controversial plan to overhaul the minimum servicing fees paid on Fannie Mae and Freddie Mac loans, after intense, across-the-board industry opposition to the idea.

Changing the way servicers are currently paid has now been officially placed on the back burner, according to a government source and industry advisors who have worked on the issue with the FHFA.

"It's DOA," says one Washington source familiar with the situation.

Sources also say that a total 'fee for service' compensation model has been scrapped entirely.

FHFA spokeswoman Corinne Russell said in an emailed statement, "Considering changes to the structure of mortgage servicing compensation is an important component of improving the operations of the future mortgage market. We received useful input on the discussion paper, and will provide an update on next steps in the near future."

Sources say that the agency's point man on the issue, senior advisor Mario Ugoletti, is expected to discuss servicing compensation and what may lie ahead in a few weeks at a national servicing conference sponsored by the Mortgage Bankers Association.

In general, servicing advisory firms a companies that hedge, evaluate, and sell mortgage servicing rights a have fought any radical change to servicing compensation, saying that a "fee for service" structure would essential remove any "skin the game" servicers currently might have.

Most major servicers opposed any change, and many on Wednesday rejoiced at the news that it was no longer in the works. …

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