title
Presentation, discussion, and possible action on Resolution No. 25-015 approving a servicer oversight services agreement; authorizing the execution of documents and instruments necessary or convenient to carry out the purposes of this resolution; and containing other provisions relating to the subject
end
RECOMMENDED ACTION
Adopt attached resolution.
BACKGROUND
TDHCA operates a mortgage revenue bond program whereby bond proceeds are utilized to fund below market mortgage loans for qualified low, very low, and moderate-income first-time homebuyers across the State of Texas. The Department also operates a TBA mortgage program whereby the Department makes mortgage loans and provides Down Payment Assistance to qualified low, very low, and moderate-income Texas homebuyers. TBA loans are pooled and sold in the open market.
TDHCA contracts with third-party firms to service mortgage loans originated by the program. The Department has utilized Idaho Housing Finance Association (IHFA) as primary servicer of both bond-funded and TBA mortgage loans since 2016. IHFA is currently servicing over $8.6 billion in TDHCA loans. US Bank and Bank of America service a small number of older TDHCA loans.
The Department has an obligation to ensure all TDHCA-originated loans are serviced in full compliance with FHA, VA, FNMA, FHLMC (or applicable Agency) guidelines and confirm that servicers are consistently following their and TDHCA’s written policies and procedures. Regular audit and review of servicer activities is also an industry best practice.
On April 10, 2024, the Department issued a Request for Proposals (RFP) for firms interested in serving as Servicer Oversight Provider. The RFP had a submission deadline of May 9, 2024. Three proposals were received. A review team of Department staff evaluated the responses, and selected Cohn Reznick to serve as Servicer Oversight Provider to the Department.
The term of the award is one year, with the ability to renew and extend for one year per renewal, for a maximum of two consecutive renewal years.
TDHCA has the right to terminate the agreement, in whole or in part, with 30 days’ notice.
Servicer oversight review will focus exclusively on IHFA’s past and current servicing activities. The work is expected to be completed across three phases over the next 18 months to two years. Total expenditure is expected to be approximately $1,000,000 over the life of the agreement.
Servicer oversight fees will be paid with indenture excess revenues.
Servicer oversight review will include a review of IHFA’s historic performance in servicing the Department’s loans, compliance with HFA (or applicable) guidelines, compliance with internal policies and procedures, and adherence with industry best practices related to timely loan processing, loss mitigation, delinquency management, foreclosures, loan modifications, and second lien recovery.
Additional services may include Mortgage Servicing Rights (MSR) valuation and advisory services related to possible MSR sales.