Before the pandemic, the servicing environment was relatively stable and predictable. Mortgage leaders could use a mix of servicing, subservicing and selling loans as determined by their overall business strategy. Of course, now many lenders are impacted by forbearance, uncertainty and SRPs of 25 bps and below.
Many of our clients have begun the process of establishing servicing or ramping up their existing servicing and subservicing. As you evaluate your options, consider the following:
Retaining MSRs can have broader accounting implications for your mortgage company.
Retaining MSRs will establish an FMV asset on your balance sheet that you will need to hedge against and must revalue on a periodic basis. You will need new policies and procedures and will be subject to new oversight requirements by the agencies as well as various regulators. We assist our clients in developing control systems that help them focus on key business functions, while adhering to the latest compliance guidelines.
Multiple subservicer options are available. Selecting a subservicer is key, as it represents a long-term relationship.
We commonly assist with selection of a subservicer in conjunction with our subservicer oversight (SSO) services. Embarking on a research process can be time consuming. We can assist you in running an RFP process with a view to industry norms regarding setup and contracting.
You’ll need a migration plan for your LOS.
You may need assistance developing a data migration plan from your LOS to your subservicer. This process can really slow down establishing your servicing portfolio, so it’s critical to get it set up, tested and implemented as quickly as possible.
An Internal Audit function and Monitoring Oversight Function are required.
Your Internal Audit function is required by the GSEs, as well as serving a myriad of other compliance purposes. It’s common for us to assist clients with establishing this in conjunction with retaining servicing/subservicing. We also commonly assist in developing the subservicing monitoring function, which performs reviews to comply with Fannie Mae and Freddie Mac servicing QC requirements and industry best practices.
If you’re evaluating your options for retaining servicing and subservicing operations, contact us. We can guide you through the process and set you up for long-term success.
