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:
- Subservicer oversight must be managed by adequate and qualified staff having knowledge of all mortgage servicing functions.
- 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.
- Maintain methods to track errors or identified deficiencies and develop a corresponding remediation plan.
- 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.
- 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.
- Monthly ongoing monitoring of subservicer-produced management reports.
- Quality Assurance reviews (including, but not limited to, customer service and collection activities, escrow management, payoffs, and loss mitigation activity).
- Annual subservicer onsite visit and policy/procedure review.
- 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.