An Insider’s Look Into How Secondary Marketing Evaluates LOs

In this webinar we’ll explore the long-term financial impacts of renegotiations, extensions and fallouts, plus basic guidelines to be viewed as a professional by your secondary marketing department

HousingWire Annual Virtual Summit

Did you miss out on HousingWire Annual? We have you covered! Join us virtually on October 25 for a chance to see hand picked sessions from our in-person HousingWire Annual in Frisco. Register now for FREE!

How brokers can help today’s unique borrower

The average borrower has drastically changed throughout the years. More borrowers are self-employed, work remotely and have multiple streams of income. Learn about the tools to assist any borrower quickly and effectively.

Experts on how AI makes a difference in the mortgage process

Today’s HousingWire Daily features a roundtable discussion on “Humans versus really smart machines” and what the right mix looks like to gain efficiencies in the mortgage loan manufacturing process.

Mortgage

FHFA watchdog calls for better oversight of specialty servicers

BofA, GSE MSR mishap leads to stricter regulations

Although the Federal Housing Finance Agency approved a settlement between Fannie Mae and Bank of America (BAC) by following its settlement review policy and procedures, the policy did not apply to agreements regarding the transfer of mortgage servicing.

Consequently, the conservator’s review of these aspects of the settlement did not benefit from such an established process.

The most important improvement FHFA needs to consider is the development of procedures for settlements — along the lines of those applicable to mortgage purchases — of compensatory fee claims and significant mortgage servicing right transactions, urged the Office of Inspector General in a new report.

In September 2011, the government-sponsored enterprise met with the banking giant to negotiate a settlement of the enterprise’s claims.

Both parties agreed to an $11.6 billion settlement, which resolved Fannie Mae’s claims that Bank of America sold it defective mortgages and mishandled various mortgages it was servicing for the GSE.

Additionally, FHFA allowed the transfer of the servicing rights to approximately 1.1 million mortgages from the mega bank to other servicers.

Fannie Mae approved Bank of America’s proposed sale of MSRs to certain specialty servicers, which was not part of the formal settlement agreements.

However, FHFA recognized that the negation of the compensatory fee exposure was directly related to the MSR transfer, and was structured to provide greater leverage in the negotiation and recovery of funds owed to the enterprise.

To its credit, the FHFA established a policy in reviewing the representation and warranty settlement between Fannie Mae and Bank of America, but its policy did not apply to the resolution of mortgage servicing, the OIG concluded in a report this week.

The overall issue at hand is that the OIG believes the FHFA did not oversee high-touch servicers during the settlement between Fannie Mae and Bank of America.

Going forward, the OIG wants the conservator to oversee such activities involving specialty servicers with a sharper eye.

Some mortgage analysts believe such a recommendation means more regulation and oversight, which comes with both, perks and drawbacks.

"At the end of the day, it is probably good for these MSR’s to move to a new special servicer that will have more of a loss mitigation focus. Though, we can debate who is even a ‘high touch’ servicer. Nationstar? Ocwen? Doesn’t seem like it," a mortgage industry professional explained.

On the reverse side, Statebridge Company, which focuses on high-touch special servicing, president and CEO Kevin Kanouff believes it means more opportunity "for servicers and perhaps, better service for the applicable borrowers."

In the past, both OIG and FHFA have expressed concerns regarding enterprise servicing transfer activities.

However, the rapid growth of specialty servicers in the market increased Fannie Mae’s operational risk, particularly in light of the fact that Bank of America had plans to transfer significant servicing portfolios to such entities.

"Based on the OIG and the agency’s Division of Enterprise Regulation studies, FHFA was aware of the complexity of, and risk associated with, large MSR transfers to specialty servicers. Thus, FHFA was aware of the significance of its own review of the specific transfers proposed," the report explained.

Although FHFA has revised and refined its delegations of authority to the GSEs, it continues to consider servicing transfers to be matters within the enterprises’ regular business activities.

Nonetheless, the conservator was involved in most aspects of the settlement between Fannie Mae and Bank of America — and after reviewing the MSR transfer — decided to allow the settlement to proceed.

"It’s an interesting question from a public policy perspective as there were loans subject to settlements and there is concern that the borrowers are getting the benefits of those settlements and agreements," a mortgage industry professional interviewed by HousingWire stated.

They concluded, "The other issue, that happens whenever loans are transferred, is disruptions and disconnects with loss mitigation efforts that were underway at the previous servicer.  Sometimes, the borrower claims that a mod or another loss mitigation solution was underway and there is no record of it."

Most Popular Articles

Fannie Mae: Mortgage rates and home prices will rise in ’22

Economists at Fannie Mae expect higher mortgage rates and home prices next year due to higher inflation, a tightening of monetary policy, and low home inventory

Oct 15, 2021 By

Latest Articles

What does it really mean to digitize the closing process?

ICE Mortgage Technology, a global provider of data, technology and market infrastructure, recently announced that Encompass eClose, its end-to-end eClose solution, is expanding its hybrid capabilities to now include full eNote and eVault functionality. In advance of that announcement, HousingWire Editor-in-Chief Sarah Wheeler had the opportunity to catch up with ICE Mortgage Technology President Joe Tyrrell to talk about what it actually means to digitize the closing process.

Oct 18, 2021 By
3d rendering of a row of luxury townhouses along a street

Log In

Forgot Password?

Don't have an account? Please