Five industry trade groups have sent a new letter to Federal Housing Finance Agency (FHFA) director Edward DeMarco, telling him – more or less – that they believe the 'fee for service' (FFS) concept would be a disaster for both the industry and consumers.
The five, including the Mortgage Bankers Association (MBA) and Community Mortgage Banking Project (CMBP), said a FFS model would eliminate “skin in the game” for servicers and offer few incentives to invest in infrastructure.
MBA, CMBP and others write that FHFA needs to justify a reason for changing the current compensation structure, noting that the agency must present “strong and compelling evidence that a fee-for-service structure would be in the long-term interests of the mortgage market and the consumers that it serves. In our view FHFA has yet to do so.”
Presently, mortgage bankers receive 25 basis points of compensation for servicing Fannie Mae and Freddie Mac loans.
FHFA has floated the idea of using a total FFS model or one that pays 20 basis points with a 5bp reserve. Fannie Mae strongly favors the FFS concept, but Freddie Mac does not.
Comment letters have been filed and to date few industry groups support FFS.
It's unclear when FHFA will make a final decision on the compensation model. It's also possible the agency will leave it unchanged.
Other groups signing the new letter include the Housing Policy Council, The Clearing House, and Securities Industry and Financial Markets Association.