The Mortgage Bankers Association (MBA) is asking the Federal Housing Finance Agency (FHFA)to assure lenders that their servicing contracts with the GSEs will not be repudiated in the event of their liquidation by the government.
In a new comment letter sent to the agency, MBA implores the regulator to keep existing GSE servicing contracts in place as a "precondition of any sale or transfer of MBS guarantee assets to a qualified purchaser."
In the event Fannie Mae and Freddie Mac are liquidated, servicers — in theory — could find their servicing contracts called into question or even eliminated.
Mortgage bankers — including the nation's largest depositories — do not own the underlying servicing rights, per se, on Fannie/Freddie loans but instead own the rights to service the loans.
Roughly 53% of the nation's housing debt, or roughly $5.2 trillion, is guaranteed or owned by the two GSEs.
Fannie and Freddie have the contractual right to seize servicing rights from their seller/servicers but must show cause. If a company loses a servicing contract it must be reimbursed by a GSE unless it is for cause.
MBA's seven-page comment letter was addressed to FHFA general counsel Alfred Pollard and signed by trade group president John Courson and chairman-elect Michael Berman. (It deals with MBS and debt issues as well.)
A few months ago FHFA issued a proposal to establish a framework for the conservatorship and receivership operations of Fannie, Freddie, and the Federal Home Loan Banks.
In its letter to the agency Courson and Pollard were critical of the proposal, calling it "overly theoretical in its approach" and speaking in "generalities."