Mark Webster, business development director, Crown Mortgage Management
Lenders, large scale outsourcers and IT providers have all recently decided to get in on the residential mortgage servicing act by purchasing a current provider. Set against a backdrop of increasing regulation, a renewed focus on loan origination and distribution, and the requirement for servicers to add value in addition to administering the loan, what will this mean for the mortgage servicing market and how will lenders reap the benefit?
One answer is investment. Whether it be in the form of better IT infrastructure, smarter channels of communication, a wider range of services or the application of specialist knowledge, the lending community expects delivery of skills it may not possess itself. The new generation of servicers must be able to demonstrate this, but more importantly demonstrate how it will benefit its clients.
Another answer is speed. In order to be competitive, for the majority of lenders, servicers need to have resources available that allow them to execute tasks to a high standard. This has to occur in a timeframe that the lender cannot achieve in-house.
In addition to this, servicers can provide a ‘one-stop shop’ for lenders. In a world where procurement rules, being able to provide an end-to-end solution which provides a number of services from a single partner undoubtedly saves the lender time and money. Key services such as business intelligence and due diligence have emerged as differentiators between servicers in recent years.
Being part of a larger organisation, with better ‘buying power’ and a solid infrastructure will affect how attractive commercial proposals from servicers are. Whilst cost is no longer the only driver, it’s still a major factor in regards to decision making criteria. Counterparty risk also falls under this header. The current set of ‘boutique’ mortgage servicers have sometimes struggled to convince organisations to outsource large portfolios, given their relative size. Will the new round of ownership transfers mean access to manage more assets?
Whilst the market watches with interest as newly acquired servicers prepare for growth, this is perhaps the most important issue for the servicers themselves. Market share will be won by making the process of getting and managing a mortgage easier for customers and by ensuring that acquiring or growing a portfolio of mortgages is easier for lenders.
So the challenge for servicers is clear. They must impress the increasingly diverse lending community with a wide range of clever, cost effective solutions that can be delivered quickly and at low risk. Whilst this challenge may have been the same for the last ten years, several servicers now have the firepower to meet it.