It is no secret that the changing market landscape has created new opportunities and threats for mortgage bankers—no more so than the changing economics around mortgage servicing rights.
Many lenders are looking at their secondary market activity and reevaluating whether they should retain servicing because of market conditions.
Today, because there are fewer aggregators, many smaller and midsize independent mortgage bankers are looking to retain servicing rights. For them, the most simple option is to go back to the way mortgage banking started—with smaller companies retaining servicing. But that requires lenders to look at their processes a bit differently.
Consider lenders that want to trade with Fannie Mae and Freddie Mac.
Previously, when they sold to the aggregators, the trade was one where the aggregator would do an audit function on the loan—after it closed. When they sell directly to the agencies, the agencies may look at the data, but there is no comprehensive audit.
Today, lenders are evaluating how they can fill that audit function through technology. Lenders can choose to outsource or manage it by the “sweat of their brow.”
The thoughtful ones are taking a closer look at how they can use their current LOS and current set of vendor partners. In doing so, they leverage that technology to ensure that the loans they are delivering conform to the specifications that the agencies require.
When you consider loan documentation preparation, there are inherent challenges lenders should consider when retaining servicing.
The new world of mortgage banking presents new hurdles and challenges. One of the most important challenges is verifying that your data actually matches your images.
If you’re using a “best-of-breed” approach, some originators will often go through their doc prep system’s gap screens to enter required information that is outside of the LOS system. As a result, a different database of record is created. Lenders must be aware of these gap screens and eliminate them or risk noncompliance.
The bottom line is that, if the lender’s data is different from the core LOS data and is sending an image and data to the GSEs and keeping the servicing, the lender could potentially be at risk. Lenders must understand that data is king and ensure that the data and images match.
As more lenders adopt retained servicing as a business strategy, they require technology that effectively integrates their disparate internal systems.
The loan origination process should be both transparent to maintain regulatory compliance, and seamless to achieve a great experience for both customers and loan officers. All of this can be achieved by replacing outdated, legacy systems with an LOS based on a universal data model.
Wil Armstrong is a co-founder and CEO of Blueberry Systems, a provider of advanced technology solutions to the mortgage and financial services industries.