Can There Really Be a Combined Originations/Servicing Platform?

Servicers are performing origination functions like loan counseling and re-underwriting modified loans. Image: Fotolia.

A visit to the Mortgage Bankers Association’s annual servicing conference in Dallas left this question hanging in air: the idea of a single point of contact for servicers is clear enough. But what about a SPOC all the way through the process, from lead gen through reconveyance? In other words, what about a combined originations/servicing shop?

The concept is getting less and less foreign. Servicers are performing origination functions (like loan counseling and re-underwriting modified loans), often using laid-off originators to do the work. What of originators servicing loans? Well, there’s at least one example of this in historic times: finance company originators routinely collected overdue payments from their borrowers.

You might think servicers would get the better of this brave new world, since adding originations to their palette would enable them to collect origination fees they don’t have access to now. But that assumes the compensation structure would remain the same, and who knows if it would? And you might think originators, the highflying salesmen and saleswomen, would be bored with having to service the loans they originate. But what if commissions were now paid on the servicing side, on collections prowess?

An advantage to this super-SPOC would be SITG (skin in the game). An originator can no longer do an iffy loan figuring it will be someone else’s problem if in fact it will be his own problem, her own responsibility. Don’t forget that it was this kick-the-can mentality that allowed risky loans to be made and then shunted to third parties, conduits and ratings agencies before coming home to roost with taxpayers.

There would probably be some economies of scale mortgage managements could find in a combined operation as well as golden opportunities for technology vendors, some of whom seem to be thinking along these lines already.

Some might object that originating and servicing 30-year fixed-rate mortgages might be too long a window for our combined specialists. Of course, the duration of most mortgages is far shorter than that, and won’t require generations of account specialists to handle the job.

On the negative side of the equation, our super-SPOCs would now be forced to be up to date on the rules and regulations of both the originations and the servicing side of the business. That might send our originators/servicers screaming out of the building.