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About
Subservicing
Introduction
Subservicing is all about lowering cost,
reducing compliance and operating risk, accessing advanced
servicing technology and enhancing customer/member services.
A type of “business
process outsourcing,” subservicing is the transferring
of the servicing of a loan portfolio to a third party on a
contract basis.
Subservicers
perform “back office” servicing functions for
clients, including: customer/member services, payment processing,
investor reporting, escrow administration and default management.
With a subservicer, the cost of back office work becomes
more predictable.
Who Needs a Subservicer?
-
Banks, credit
unions, mortgage companies, housing authorities and other
financial institutions (“Companies”) that need
a cost effective alternative to in-house servicing.
-
Companies who need help to obtain Investor (such as Fannie
Mae or Freddie Mac) approval to service secondary market loans.
-
Companies with interim servicing needs before loans are sold
to investors/correspondents service released.
-
Companies in a high volume cycle of business needing help
with the overflow.
-
Companies with portfolios having unique loan characteristics.
Benefits
of Subservicing
1.
Subservicing can lower cost to service
-
Subservicers
have critical mass and can pass on cost benefits that come
with economies of scale.
-
Because
of large business volumes with vendors, subservicers receive
lower property inspection fee rates, etc. These savings
are passed on to a subservicer’s clients.
2.
Operational Risks Transferred to Subservicer - Those
high risk servicing functions now become the responsibility
of the subservicer:
-
ARM
changes
-
Timely and accurate
collection & payment
of escrow items
-
Timely performance of default management events
-
Private Mortgage Insurance (PMI) administration
-
Timely preparation and filing of lien satisfaction documents
-
Year end reporting
3.
Compliance Risks Transferred to Subservicer – left
unmanaged compliance risk can lead to fines, penalties,
loss of approval or loss of servicing fee income. Are you
compliant with the following?
4.
Subservicing Provides Ability to Expand Mortgage Servicing
Business Without Expanding Infrastructure
- No need to acquire additional space, hardware, software,
human resources for servicing business growth.
- Subservicing allows for reallocation of internal resources.
- Subservicing
reduces management focus on “back
office” issues.
5.
Immediate Access to Advanced Servicing Systems
-
Clients “lease” a
state-of-the-art servicing platform, without lead time
or developmental expense.
- Clients
gain improved reporting capability.
-
Modular based systems support a variety of mortgage products
and remittance types.
6.
Enhanced customer/member services
-
Subservicers
offer borrowers advanced access to loan information via:
the Internet, VRU (telephone), and monthly billing statements
and eStatements.
-
Subservicers
meet borrower demand for more remittance options: electronic
debit, pay by phone and making payments in client branch
offices.
At
the “Center” of Your Servicing Needs
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