The Servicing Rights on Offer (SRO) program, developed by the Federal Housing Finance Agency (FHFA), acts as an auction process for these services. Through the SRO program, Freddie Mac and Fannie Mae intend to sell servicing rights to competitive bidders in order to market various pools of residential mortgage loans to investors.
The SRO program has been in operation since 2019, and FHFA hopes that it will bolster liquidity and competition among servicers. Currently, the two government-sponsored enterprises (GSEs) are offering $1.9 billion worth of loans with their most recent sale; previous SRO offerings had a maximum of $1 billion each. The majority of the loans included in this offering come from servicer transfers from other companies.
The article notes that both Fannie Mae and Freddie Mac have high standards for servicers that wish to participate in the SRO program. In order to be eligible, servicers must have “well-established operations” and “demonstrated experience in managing a quality loan servicing portfolio.” They must also be compliant with FHFA regulations and adhere to the GSEs’ servicing standards.
The article further explains the two different types of loan servicers – primary and master. Primary servicers are responsible for collecting payments from borrowers, while master servicers are in charge of all reporting and administrative duties related to the loans. While some firms have chosen to separate the two roles, others have opted to perform both services.
In addition to the SRO program, Fannie Mae and Freddie Mac have also developed a Loan Modification Program (LMP). This program reduces interest rates on certain kinds of mortgages to help struggling borrowers stay current on their payments. The article states that the LMP has helped over three million borrowers since 2009.
In summary, the article discusses the SRO program created by the FHFA which allows Fannie Mae and Freddie Mac to sell servicing rights to competitive bidders. The article explains the requirements and qualifications for servicers who wish to be involved in the program, and gives an overview of the primary and master servicer roles. Lastly, the article outlines the Loan Modification Program which has helped over three million borrowers since 2009. The SRO program is a great way for Fannie Mae and Freddie Mac to increase liquidity and competition among servicers, as well as provide assistance to financially struggling homeowners.
This article was contributed on Aug 13, 2023