The FHFA published a proposed modification to the servicer eligibility standards to be approved to sell and service for the GSEs. They are posting it for 60 days of comment, a relatively short window for rule making.
The proposal would keep the $2.5 million minimum tangible capital requirement but would add two new provisos that would require an additional 35bps for the full UPB of all GNMA servicing and 25bps for all other servicing.
In surveying a group of IMBs today it is clear that most reserve between 5-15bps for GNMA mortgages and less for GSE serviced loans. The 35 bps could be a significant addition and force FHA rates to consumers to increase as a result of the FHFA rule. More importantly if it must be met upon becoming a final rule some companies might face a one time infusion of capital.
Of note, FHFA does not regulate loans or securities serviced as GNMA mortgages but they do have the right to establish safety and soundness capital levels to protect the counter party risk that they inherit.
With a short time frame, the question is whether the industry, especially non bank servicers, can organize an effective response to this proposal. With the MBA IMB conference just about to begin, this should be an important topic.
David H. Stevens, CMB, advisor to Mortgage Media, is the CEO of Mountain Lake Consulting, Inc. Dave is a 36-year veteran of the mortgage banking industry having served as the US Assistant Secretary of Housing and as CEO of the Mortgage Bankers Association.