Outsourcing: Don't Do It All Yourself
There's always the temptation to do things ourselves. After all, you can save a lot of money by cutting the kids' hair yourselves. But when it comes to mortgage servicing, sometimes it's best to outsource certain tasks and functions to an expert. Firms that provide outsourcing to the mortgage servicing industry generally add value in two ways.
First, they can build expertise and competency that is unique to a particular task or area of the business, such as default management, escrow management, lien releases, document services or technology. They can stay abreast of compliance requirements that come down from all levels of government and from investors that ultimately own the beneficial interest in the loans. That's a big advantage in today's compliance conscious world, and it is one reason why rating agencies increasingly smile upon lenders outsourcing functions to an expert.
Second, a specialist can invest in technology and accumulate economies of scale that a servicer might not be able to achieve on their own. Particularly for small and midsized lenders, one way to obtain the efficiencies of scale that previously were only available to mega-servicers is to capitalize on the technology and capacity of an outsourcer.
Every lender has to decide what is the right balance of doing things in-house vs. outsourcing for themselves. The important thing is not to let pride get in the way. Sure, you can always hire the staff and obtain the technology to do something yourself. But if an outsourcer can do it better or cheaper, it only makes sense to take advantage of their expertise.
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