FHFA Outlines Two Proposals In Servicing Comp White Paper

The Federal Housing Finance Agency (FHFA) has released a new discussion paper outlining two potential compensation schemes for mortgage servicers. The agency is also asking for public comment on the paper, which was developed as part of the FHFA's joint initiative on alternative mortgage compensation structures.

One proposal would establish a reserve account within the current servicing compensation structure, while the second proposal would create a new fee-for-service structure. The proposals stem from meetings with various stakeholders, the FHFA said in a statement.

The FHFA originally announced the compensation initiative in January, when it directed Fannie Mae and Freddie Mac to work with it and the U.S. Department of Housing and Urban Development to consider future alternative structures. The goal of the effort, according to the FHFA, is to improve customer service, reduce financial risk for servicers and provide guarantors more flexibility in default management, as well as promote liquidity in the To Be Announced securities market.

More broadly, other goals of the project include enhancing competition in servicing and origination sectyors and devising a compensation structure that could be replicated across multiple future states of housing finance, the FHFA said in its statement.

The FHFA opened a 90-day public comment period Tuesday. To view the 37-page white paper, click here.

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