The Mortgage Bankers Association (MBA) wants to delay a final decision that is expected this summer on revamping residential mortgage servicing fees.
In a letter sent Tuesday to Treasury Secretary Timothy Geithner and the Federal Housing Finance Agency's (FHFA) acting director Edward DeMarco, John Courson, the MBA's president and chief executive, asked for a delay to any final decision to allow industry input.
"The change to the servicing fee impacts far more than mere compensation," Courson wrote. "It affects counterparty risk, servicing values, tax policy, representations and warranties, prepayment speeds and rights to the asset."
In January, the FHFA said it planned to overhaul how mortgage servicers are paid, and Fannie Mae and Freddie Mac officials laid out four possible changes to the current 0.25% servicing fee at an MBA summit.
Courson said the current GSE proposals raised far more questions than answers. "MBA has not yet heard any discussion with regard to the 'default servicing fee,' which is a substantial component to evaluating the impact of changing the current 25-basis-point servicing fee," the letter said. "When would the 'default servicing fee' be triggered — at 30, 60 or 90 days delinquency? What is the appropriate amount of fee for each stage? How will the payment be structured, as a flat fee or by specific service? Will the servicing of defaulted loans transfer to a third party? What impact will this have on the guarantee fee structure currently in place?"
Others in the industry have questioned the need for a change in servicer compensation. They say servicing problems are primarily because of the overwhelming volume of nonperforming loans that were themselves caused by poor underwriting, not the current fee structure.