FHA shortages and specialty servicers

By Sari R. Updated on 11/19/2012

The Federal Housing Administration (FHA) mutual mortgage insurance fund is currently short by more than $13 billion.  Because of this, the FHA is currently considering a mortgage servicing rights transfer.  Researchers and analysts with Compass Point Research & Trading believe that the FHA has a legitimate case to transfer these rights to specialty servicers from the current servicers.  The FHA Office of Inspector General Report also wants these transfers to happen.

Currently, 9.6% of FHA’s $1.1 trillion single-family loans are seriously delinquent.  Most of these extremely late mortgages are linked to the 2006 – 2008 loan vintages.  This makes many lenders concerned about the servicing quality; expert handlers of these loan types are desperately needed.

The FHA states that loss mitigation could be handled by transferring the servicing rights to special servicers, requiring servicers to utilize third-party contractors to help with loss mitigation, and force a sub-servicing loan agreement for loans that could present issues.

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