The debate on the appropriateness of the minimum servicing fees established by Fannie Mae and Freddie Mac - currently at 25 basis points - is heating up (see ASR 1/10/05). In this light, last week the Mortgage Bankers Association released a report featuring its member's views and concerns about the issue.
To underscore the importance of minimum servicing fees, the MBA said that the magnitude of GSE master servicing rights outstanding has reached over $3 trillion in unpaid principal amount. The Association added that a market concern is that the TBA market could be divided between pools with higher and lower minimum servicing fees, which could negatively affect liquidity and price levels and result in higher borrowing costs. The MBA further said that, "the servicing fee minimum level is such an integral part of the structure of the MBS and has the potential for such a competitive impact that many MBS market participants all have a stake in where the minimum level for servicing fees is set."