Why value does mortgage servicing have to a bank or company?

Companies (3rd party or original lender) are paid to service (collect and process payments and escrows) mortgages on behalf of investors. For example: Bank XYZ funds a conventional 30 year mortgage and then sells it to Fannie Mae (meaning, Fannie Mae pays just over face value for note, and now has the right to collect the interest over 30 years). Bank XYZ now has their money back so they can keep lending again and again.

Let’s assume the rate is 5.0%. Fannie Mae is owed 5% per month from the borrower … but Fannie Mae doesnt want the labor intensive job of collecting payments, mailing statements, calling borrowers, etc. So, they agree that bank XWZ can retain the servicing rights for .25% …

Bank XYZ bills and collects payments at 5% every month, takes .25%, and sends Fannie Mae 4.75% per month instead of the full amount. Bank XYZ makes money every month for doing the dirty work, and Fannie Mae still makes 4.75% interest on the money they paid Bank XYZ for the loan without doing anything difficult.