Ginnie Mae to erase flat fee for servicing reverse mortgages
Ginnie Mae will require issuers of reverse mortgage-backed securities to pay servicers based on a basis point strip of the interest beginning this summer. The requirement, which takes effect July 1, essentially ends paying a flat fee for the servicing of these loans. Ginnie guarantees the timely payment of principal and interest to investors on government-backed MBS, mostly those insured by the Federal Housing Administration. Approved lenders also securitize Ginnie-backed HECM, or reverse mortgage-backed securities through its HMBS program. The current servicing compensation method allowed the issuer to choose between a flat servicing fee of between 6 and 25 basis points or a strip of the interest of between 25 and 75 bps. According to the requirement sent to issuers last week, however, the only option available is the basis point servicing strip fee of between 36 and 150 bps. This includes a 6-bps Ginnie Mae guaranty fee. Fannie Mae, Freddie Mac and their regulator, the Federal Housing Finance Agency, are at work revamping how servicers of forward mortgages will be paid. Since the '8os, the method had been a flat 25 bps servicing fee, but as foreclosures began to mount after the financial crisis, the model quickly became obsolete. New guidelines for the forward mortgage servicing fees are expected this summer, though some trade groups, including the Mortgage Bankers Association, have asked for more time. Write to Jon Prior. Follow him on Twitter @JonAPrior.