Fannie Mae, Freddie Mac to consider new fee structure for mortgage servicers

The Federal Housing Finance Agency directed Fannie Mae and Freddie Mac to work on a new payment structure for mortgage servicers in the future. Servicers are currently paid a minimum servicing fee that is part of the mortgage rate, which the FHFA said, is not “optimal” for the best work on nonperforming mortgages for either the borrower or the government-sponsored enterprises. The FHFA said the new structure will improve servicing for borrowers, reduce the financial risk of the servicers and give the GSEs more flexibility when managing the loans. The new plan could include a new fee for servicing those nonperforming mortgages and could possibly reduce or eliminate the minimum servicing fees for performing loans. “As the recent problems in managing mortgage delinquencies suggest, the current servicing compensation model was not designed for current market conditions,” FHFA Acting Director Edward DeMarco said. Mortgage servicers have come under fire for mishandling affidavits in the foreclosure and modification process, with some consumer groups arguing that the current fee structure is an incentive for the servicer to foreclose rather than work with the borrower. However, Fannie and Freddie have directed their more than 3,000 contracted servicing companies to consider alternatives before pursuing a foreclosure. The Mortgage Bankers Association will hold a summit in Washington, D.C. Wednesday, inviting industry players to consider a new mortgage servicing standard. However, it warned regulators this month not to rush. “Through our Council on the Future of Residential on Mortgage Servicing, we are looking at many of the same issues that Fannie, Freddie and FHFA will presumably be looking at,” MBA CEO John Courson said in a statement sent to HousingWire.  “We welcome the GSEs’ participation in the broad debate over how to improve the mortgage servicing model and look forward to working with them on a new structure that better serves consumers, investors and servicers.” In a letter to DeMarco, Treasury Department Secretary Timothy Geithner and Department of Housing and Urban Development Secretary Shaun Donovan supported the initiative and pledged to work closely with the agency. “The current model has not motivated mortgage servicers to invest the time, effort and resources needed to fully explore all options to help delinquent borrowers avoid foreclosure,” they wrote. “As we move ahead on a comprehensive plan to reform the Nation’s housing finance system, addressing this issue will help better protect homeowners, investors, and taxpayers, while also increasing efficiency and competition in that market.” The FHFA said the industry, consumer groups, investors and government agencies will be given the next several months to provide feedback, but it does not expect any new implementation before the summer of 2012. Write to Jon Prior. Follow him on Twitter: @JonAPrior