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Report regarding a Request for Proposal issued by the Texas Department of Housing and Community Affairs (TDHCA) for Master Servicer and selection thereof
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BACKGROUND
TDHCA has utilized Idaho Housing Finance Authority (IHFA) as primary servicer of both bond- funded and TBA mortgage loans since 2016. IHFA is currently servicing $8.6 billion of TDHCA loans. The current IHFA servicing agreement is a “retained servicing” model whereby TDHCA receives some portion of servicing income throughout the life of the loans. As the agreement is drafted, TDHCA also retains ongoing financial exposure to the servicing portfolio.
The Department sought to hire a new master servicer in an effort to diversify its servicing book, reduce its ongoing financial exposure and shift to a “released servicing” model whereby TDHCA will be paid a Service Release Premium (SRP) when the loan is purchased by the servicer.
Moving to an SRP model will provide increased certainty on mortgage loan pricing, enhance liquidity, provide the Department with more flexibility in structuring bond deals, and enable the Department to provide more aggressive TBA rates for low and moderate-income home buyers.
On February 14, 2024, the Department issued a Request for Proposals (RFP) for firms interested in serving as Master Servicer. The RFP had a submission deadline of March 22, 2024. One proposal was received. A review team of Department staff evaluated the response and selected The Money Source to serve as Master Servicer to the Department.
The contract is expected to begin on November 8, 2024. The term of the award is three years, with the ability to renew and extend for one year per renewal, for a maximum of two consecutive renewal years.