The Federal Housing Finance Agency (FHFA) Wednesday morning laid out its options for restructuring mortgage servicing compensation, including the possibility of eliminating the 25 basis point minimum paid on performing loans.
In prepared remarks before a servicing trade show, FHFA director Edward DeMarco noted that changes to servicing compensation are "complicated and affect several aspects of the mortgage financing process."
FHFA, in consultation with the Department of Housing and Urban Development, is mulling several compensation alternatives. DeMarco said that whatever course the agency takes, it is paramount that mortgage market liquidity be maintained while preserving profitability for servicers of all sizes.
According to figures compiled by National Mortgage News and the Quarterly Data Report, the nation's top five servicers control 64% of all MSRs in the U.S., a figure that is not lost on FHFA's DeMarco.
In a speech prepared for the Mortgage Bankers Association's servicing conference in Dallas, the regulator noted the huge market share concentration, saying some of it is "related to economies of scale" but is also tied to servicing compensation.
"The current servicing compensation structure results in the creation of a mortgage servicing right asset, which is difficult to manage and is separate from a servicer's core competency of servicing mortgage loans," he said.
The GSEs themselves will have a say in restructuring servicing compensation through a new working group that is in the process of being formed.