[Update 1: Clarifies possible transfers as part of servicing fee changes] The government-sponsored enterprises and their regulator the Federal Housing Finance Agency are changing the way servicers are paid based on the performance of the loan, but this could lead to unintended headaches and more confusion for borrowers. In the most heavily attended session Thursday at the Mortgage Bankers Association servicing conference, Freddie Mac Vice President Bryan Pommer said the government-sponsored enterprise is trying to determine at what delinquency stage the compensation for the sevicer would change. Agency mortgages that fall 30 days delinquent are more likely to become current again rather than continue to be delinquent, Pommer said, so that transfer may have to come at a deeper delinquency stage. “We haven’t started to draw that line,” Pommer said. Some servicers have already drawn the line internally. In February, Bank of America (BAC) built a new department in its home loan division that would handle just delinquent loans. LenderLive Network expanded its servicing department to bifurcate performing and nonperforming loans as well. But J. David Motley, president of the Dallas-based servicer Colonial National Mortgage, said borrowers were already confused about the disclosures. If the new standards force the loan to move from servicer to servicer based on loan performance, borrowers could be flooded with “hello, goodbye letters” of transfers. “As they try to fill out documentation and reach someone, they’re getting letters in the mail from their old servicer and the new one at the same time,” Motley said. “This could be really problematic for the borrower, who’s already confused by the process as it is.” Steve Horne, who founded the specialty servicer Wingspan Portfolio Advisers three years ago, said companies already operating in that niche of nonperforming loans said systems are already in place to handle transfer disclosures, and that at least some servicers should be able to handle the transfers. “From the servicer’s perspective, I don’t think it should be a problem at all,” Horne said. Still, Pommer said that building too much automation into the new fee structure in GSE servicing guidelines will raise other concerns and eliminate key judgment Fannie and Freddie take when deciding which servicer gets what loan. “I don’t think we want loans moving automatically from a high-performing servicer,” Pommer said. Write to Jon Prior. Follow him on Twitter: @JonAPrior

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