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Subservicing Oversight

Q: As a Master Servicer, what should I be doing to oversee my subservicer?

A: Fannie Mae recently updated some of the master servicer oversight requirements in Section 10 of its Servicer Self-Assessment Guide. Pages 30-31 of the Servicer Self-Assessment Guide outline requirements and best practices that a master servicer should have in place in order to adequately oversee the subservicer relationship. Some, but not all, of the safeguards listed below include:

  1. Subservicer oversight must be managed by adequate and qualified staff having knowledge of all mortgage servicing functions.

  2. Quality Control audit sample sizes must be relevant to the portfolio size (10% unless statistical representation can be achieved) and the loan level reviews should target specific risk-based factors.

  3. Maintain methods to track errors or identified deficiencies and develop a corresponding remediation plan.

  4. If the master servicer finds issues within a particular process, it must have a plan in place to increase the sample sizes and/or the frequency of audits.

  5. Hold meetings with the servicer's risk committee to review audit findings and discuss action plan items on a monthly, quarterly or semi-annual basis.

  6. Monthly ongoing monitoring of subservicer-produced management reports.

  7. Quality Assurance reviews (including, but not limited to, customer service and collection activities, escrow management, payoffs, and loss mitigation activity).

  8. Annual subservicer onsite visit and policy/procedure review.

  9. And more...

Master servicers are responsible for the actions and inactions of their subservicer. As a critical vendor, the master servicer should ensure it is meeting all of the minimum subservicer oversight requirements outlined in the Fannie Mae Servicer Self-Assessment Guide, other GSE and investor requirements, in addition to all other vendor management responsibilities.

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