A new report from the Federal Housing Finance Agency (FHFA) inspector general (IG) on Fannie Mae’s MSR deal with Bank of America also confirms that the GSE tried to buy specialty servicer Litton Loan Servicing, though it does not mention that Houston-based company by name.
The IG also noted that Fannie Mae, as a way to handle troubled loans, has been financing “a portion” of MSR transactions by third-party servicers. In the past ASR sister publication National Mortgage News has reported on this issue with no response from Fannie.
In 2008, before it was taken over by the government, NMN reported that the GSE had explored the idea of buying Litton, a privately held “high touch” servicer. The deal collapsed that summer a few months before the federal takeover in September. Eventually Litton was bought by Ocwen Financial Corp., which is currently a servicing vendor to the GSE.
A little over a year ago Fannie bought $73.6 billion of MSRs from Bank of America, paying $421 million for the receivables. Initially, Fannie denied to this and other news organizations that a sale of MSRs had taken place.
The IG of the FHFA notes in its new report that Fannie’s purchase of MSRs was not “an isolated event,” adding that “it was the most recent of several transactions executed as part of an ongoing initiative.”
Fannie, by law, is allowed to own MSRs. Traditionally, it has stayed out of that business as a way to maintain good relations with mortgage banking firms that sell loans to the company. However, in the past, when it saw poor servicing performance on troubled loans, it yanked MSR contracts, sometimes buying those rights.