Almost hands down most mortgage trade groups and sectors of the business have shot down a “fee for service” concept to replace the existing GSE servicing compensation structure. But don’t tell that to Lenders One, a nationwide cooperative of residential funders.
In an interview with National Mortgage News, Lenders One CEO Scott Stern said his organization – a unit of the publicly traded Altisource – favors the FFS model because among other things it likely would create more buyers of whole loans.
“A lot of our members sell [their originations] servicing-released,” said Stern.
Lenders One believes that “it’s too capital intensive to buy servicing” said Stern.
He adds that if an interest-only (IO) strip can be created, then a lender can either keep or sell that asset in the secondary market. “There would be hundreds of buyers for an IO strip,” he said.
The Mortgage Bankers Association, servicing brokers, and other groups favor no change to the current 25 basis point fee structure or will accept a 20bp payment with a 5pb set aside. (Fannie Mae is pushing for change, but Freddie Mac is not.)
But both Lenders One and MBA agree on one thing: the Federal Housing Finance Agency, which is controlling the debate on servicing compensation, has yet to tell the industry how much the FFS will be for both performing and nonperforming loans. “We do have some concerns,” said Stern. “There are gaping holes in what FHFA has proposed.”