The Mortgage Bankers Association (MBA) has adopted a model sale and servicing agreement it anticipates will become the standard form for industry participants to use voluntarily for whole-loan purchases and sales made with an eye toward potential securitization.
The agreement was adopted this week by the MBA's Residential Board of Governors (RESBOG) as an MBA supported best practice.
The model agreement is part of an MBA initiative to help increase liquidity and efficiency in the non-conforming residential mortgage market. The agreement provides standard formatting and text for standard practices, which the trade group says will help to reduce the time, effort and cost of legal and due diligence reviews. The agreement also includes standard formats for transaction-specific terms.
"At the current time, there is virtually no private-label MBS market to speak of," says John A. Courson, the MBA's president and CEO. "When the market begins to return, we expect it will start with whole-loan transactions. This model agreement will provide consistency and transparency to help investors get a better understanding of the whole loans they are purchasing."Â Â
A working group of the MBA's Secondary and Capital Markets Committee developed the model agreement by consolidating elements of existing whole-loan servicing agreements. The current model agreement incorporates input received as part of a public comment process. The MBA anticipates further refinements to the agreement this year and a process of regular periodic review going forward.
"The model agreement was drafted by members, for members and with significant input from a wide variety of stakeholders," says Courson.Â "Plus, we've developed protocols so that the agreement reflects standard practices and legal requirements both now and in the future."Â
SOURCE: Mortgage Bankers Association