Guide to Mortgage Subservicing

Over the past two years, servicing-heavy companies such as Ditech Financial, Flagstar Bancorp and Nationstar Mortgage have moved to sell the servicing rights they own while maintaining a subservicing arrangement with the new owner. The buyers in many cases have been firms that have no existing servicing infrastructure and, at least to date, no desire to handle the day-to-day work involved with servicing an existing mortgage.

As a result the volume of outstanding mortgage loans serviced by a company other than the one that owns the servicing rights grew to $2.12 trillion at yearend 2017, fully 19.9 percent of all home mortgages in the U.S.

The increasing use of subservicers allows MSR owners to retain the cash flow while avoiding the headaches associated with building and/or maintaining a servicing platform that stays within regulatory boundaries. In many cases, MSR owners also rely on specialty subservicers to handle especially expertise-intensive loans, such as delinquent and nonperforming mortgages.

But outsourcing the day-to-day handling to a subservicer does not mean an MSR owner is without responsibility. In the Guide to Mortgage Subservicing, Inside Mortgage Finance examines what types of companies would benefit from using a subservicer, how to select one and set up the relationship, and steps an MSR owner must take to maintain a successful and compliant subservicing situation.

The guide covers:

  • Who should hire a subservicer,
  • Finding a new subservicer,
  • Negotiating a new subservicer agreement,
  • Reporting and oversight,
  • A tapestry of regulations,
  • Relationship management,
  • Benchmarking success,
  • Technological advancements and retreats, and
  • The future of subservicing.
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