Resolution Trust Corporation:

Better Information Could Enhance Controls Over Loan Servicing Costs

GGD-94-41: Published: Dec 22, 1993. Publicly Released: Dec 22, 1993.

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GAO discussed the Resolution Trust Corporation's (RTC) loan servicing contracting requirements, fee structures, and costs.

GAO found that: (1) RTC regional offices do not coordinate their loan servicing contracting activities; (2) each RTC regional office independently awards its own servicing contracts, resulting in wide variations in the types and amounts of loan servicing fees paid by regional offices; (3) RTC does not have information on all of the fees and expenses the regional offices are paying their loan servicing contractors; (4) RTC is unable to effectively manage its active contracts and lacks the information needed to establish the most cost-effective fee structures for future contracts; (5) although RTC does not coordinate its oversight of loan servicers, several regional offices are routinely conducting on-site performance reviews of some loan servicers; and (6) RTC has implemented a national loan servicer oversight program that has increased coordination among its regional offices in overseeing these contractors.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: RTC has initiated several actions to improve the accuracy of loan servicing cost data and set fee structures that are appropriate for the services provided. RTC's actions have included collecting detailed information on fees paid to contract servicers, using this information to guide the setting of fee structures, maintaining fee and cost comparison schedules to determine the least costly servicing arrangements, and removing assets from higher cost servicers.

    Recommendation: To improve loan servicing contracting practices, the President and Chief Executive Officer, RTC, should direct the Chief Financial Officer and the Senior Vice President for Asset Management and Sales to routinely collect the information needed to monitor loan servicing fees and expenses and use this information to develop cost-effective compensation structures in future contracts.

    Agency Affected: Resolution Trust Corporation

  2. Status: Closed - Implemented

    Comments: RTC has developed standard loan servicing agreements and statements of work to be used by all RTC offices regardless of its region of origination.

    Recommendation: The President and Chief Executive Officer, RTC, should require the Office of Contracts, under the Vice President, Division of Administration and Corporate Relations, to direct and coordinate all loan servicing contract solicitations and to ensure that the contracts include standard provisions allowing their use by all RTC offices.

    Agency Affected: Resolution Trust Corporation

 

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