Structured Credit Investor: Servicing Guidance SlatedStructured Credit Investor
15 July 2014
The FHFA is set to issue guidance by 1 December aimed at ensuring that non-bank servicers meet current servicing requirements. The move follows the release of an Office of Inspector General (OIG) report identifying broad problems in the mortgage servicing industry.
SFIG notes that some of these problems include: non-bank mortgage servicers taking on more loans than they can handle; payment delays to Fannie Mae and Freddie Mac; and limited credit availability, threatening servicers' ability to fund operations. "The Inspector General's report points to a lack of infrastructure to properly service all loans that non-bank servicers acquire. Fannie and Freddie became aware of these operational problems after sending special teams to servicers and finding weak infrastructure and careless handling of borrower complaints," the association observes.
The report further found that the rise in non-bank special servicers has been accompanied by "consumer complaints, lawsuits and other regulatory actions as the servicers' workload outstrips their processing capacity".
FHFA agreed with the majority of the OIG's recommendations and the forthcoming guidance is expected to establish a better strategy to manage counterparty risks associated with troubled loans, including those serviced by non-banks.