As the mortgage industry adapts to rising borrower expectations, technological transformation, and heightened regulatory scrutiny, lenders are rethinking one of their most fundamental operational questions: Should we service loans in-house or partner with a subservicer?
That strategic decision, discussed in Richey May’s recent webinar Uncovering Hidden Risks: A Mortgage Bank’s Guide to Compliance, can define an institution’s long-term efficiency, risk profile, and customer experience. Featuring Seth Sprague, CMB, Director, Mortgage Banking Consulting Services at Richey May; Mignonne Davis, Director of Risk & Compliance at Richey May; and Andrew Pohlmann, Senior Vice President of Business Development at Cenlar FSB, the session explored how institutions can align servicing models with business objectives while maintaining operational excellence and compliance readiness.
Whether lenders keep servicing in-house or outsource it, the key lies in intentionality—continuously evaluating whether their current approach still supports their growth, compliance, and customer engagement goals.
Servicing Strategy Is Not Set-and-Forget
Mortgage servicing is not a static function. Institutions must regularly reassess their servicing models, especially as loan volumes, risk appetites, and technology evolve.
As Seth Sprague noted, many lenders underestimate the operational intensity of managing delinquent loans or the cost of scaling technology and staff. Smaller or midsized lenders may find that subservicers—who spread technology and compliance investments across multiple clients—offer a more efficient and sustainable path.
A deliberate servicing strategy begins with precise alignment between long-term business goals and the chosen operating model. Servicing choices should complement—not compete with—the organization’s broader lending and profitability objectives.
The Subservicer Advantage: Scale, Technology, and Specialization
Modern subservicers have evolved from back-office processors into technology-driven partners for customer experience. Their significant investments in automation, artificial intelligence, and predictive analytics allow them to manage delinquencies, loss mitigation, and borrower communication with speed and precision.
For lenders managing variable loan volumes or planning to buy and sell mortgage servicing rights (MSRs) frequently, subservicing offers scalability without the burden of maintaining fixed operational costs. Subservicers also provide the infrastructure to meet complex state-by-state compliance standards—capabilities that can be difficult and costly for smaller institutions to replicate.
Yet outsourcing does not absolve lenders of responsibility. Active oversight, frequent audits, and performance benchmarking are crucial for maintaining accountability and ensuring regulatory compliance. As the speakers emphasized, successful partnerships rely on continuous engagement: “Even when you outsource servicing, you never outsource responsibility.”
The Risks of Underestimating In-House Complexity
For institutions considering bringing servicing in-house, the transition often proves more complex than anticipated. Managing delinquent loans, handling escrow accounts, and meeting borrower communication standards all require specialized teams and sophisticated systems.
Many lenders also overlook the resource drain that occurs when key servicing personnel leave—taking institutional knowledge and process stability with them. Without a carefully documented transition plan, even a brief lapse in operational continuity can lead to compliance gaps or reputational damage.
In-house servicing can offer enhanced control and brand consistency. Still, success depends on readiness: the right talent, technology, and compliance structure must already be in place before assuming full ownership.
Oversight and Accountability: The Core of Subservicing Success
Even the most capable subservicer still requires rigorous oversight. Lenders must maintain active governance programs that include regular reviews of performance metrics, borrower experience data, and compliance testing.
Richey May’s experts recommend that institutions formalize oversight through:
- Quarterly or semiannual operational audits.
- Comprehensive compliance reviews aligned with regulatory changes.
- Defined escalation protocols for performance or servicing quality concerns.
This structured engagement ensures that the relationship remains dynamic—responsive to both the lender’s evolving needs and the market’s shifting demands.
Borrower Expectations Are Redefining the Benchmark
The modern borrower no longer compares their mortgage experience to other lenders—they compare it to their favorite digital retailers. Servicers can no longer benchmark themselves against other servicers because consumers are benchmarking their online experience across other retail providers that they have.
For lenders, that means servicing is now a core brand experience, not a back-office process. Technology, personalization, and responsiveness are critical to retention and recapture strategies. Subservicers with robust digital infrastructure can help lenders meet these heightened expectations while focusing on origination and growth.
Balancing Control, Compliance, and Customer Experience
There is no universal answer to the question of in-house servicing versus subservicing. The right approach depends on an institution’s scale, strategic priorities, and risk tolerance. What is universal, however, is the need for continuous evaluation.
Lenders that periodically reassess their servicing strategies—through the lens of scalability, compliance, and customer experience—position themselves to operate efficiently in any market environment.
To explore these insights in greater depth,
Watch the on-demand webinar Uncovering Hidden Risks: A Mortgage Bank’s Guide to Compliance below, featuring Richey May and Cenlar FSB.
