Mortgage Bankers Association Chairman David Motley believes that services should proceed with caution when overhauling the compensation structure, according to a recent report. Motley's concerns focus on a ripple effect that could impact the real estate finance industry, according to a recent report.
"Servicers typically receive 25 basis points of borrowers' monthly mortgage payments as a fee for managing loan accounts," according to National Mortgage News.
"With enough scale and automation, the cumulative fee revenue from a servicing portfolio can sustain operations. But when delinquencies and defaults soar, as they did during the financial crisis, many servicers found themselves in a cash crunch, particularly as investors and regulators demanded greater levels of loss mitigation and foreclosure timelines grew incredibly lengthy."
Servicer are looking for a different way to receive compensation, one of which would involved a "fee for service," according to NMN. It would also include additional fees for any added services or work if borrowers default on loans or fall behind, the report continues.
To learn more about Motley's suggestion for servicers click on the image above.