GMAC Continues to Build Subservicing Volume
With loan origination volumes tapering off and a plethora of new products gaining in popularity both among lenders and consumers, the subservicing industry is adapting to a new marketplace.
And GMAC Mortgage, one of the industry's biggest subservicers, believes that its relationship with Wall Street firms has proven to be an advantage as the securitization of new products evolves. GMAC sees an advantage in its ability to service multiple products, including consumer loans, from a single platform.
Ken Perkins, the company's senior vice president for business development, told Mortgage Servicing News from the company's offices here that trends in the origination side are forcing lenders to re-evaluate their businesses.
"I think clearly the origination side is expecting a lot of contraction of margins. As margins contract I think companies start paying more attention to cost."
That focus on cost is driving some lenders to outsource servicing functions, particularly those that just service loans on an interim basis pending sale and securitization of the portfolios. This year GMAC has picked up a number of interim servicing clients that wanted to reduce their operational costs, he said.
And sometimes, that works out well for the Wall Street firms that eventually securitize the portfolios as well. If the Wall Street firm uses GMAC as a subservicer - and GMAC has servicing relationships with a number of street firms - the investment banking firm may encourage an originator or conduit to use GMAC for servicing. That minimizes servicing transfers, Mr. Perkins noted, and helps to maintain stronger customer relationships.
"While nobody can put a value on that, there is value in not having that loan transfer an extra time or twice." His thoughts were borne out by a recent J.D. Power study, which found that servicing transfers negatively affect customer satisfaction among mortgage borrowers.
But trends in the marketplace can also create challenges for subservicers. Mr. Perkins noted that Wall Street firms are creating pressure to securitize loans more quickly than in the past, which means the period of time during which an interim servicer is used may be shorter. That also puts pressure on transfer times.
GMAC places a large emphasis on its ability to service multiple products. With subservicing clients quickly adding new loan products to their origination menu, many are lacking servicing expertise in these products, including alt-A, pay-option, home-equity lines of credit and lately closed-end seconds, Mr. Perkins said. GMAC sometimes finds clients come to them first when the client wants to add a loan product, because they know GMAC can manage loan administration of the product type. As a mega-servicer (GMAC's subservicing portfolio totaled $42 billion at the end of the second quarter. The company's total mortgage servicing portfolio totaled nearly $300 billion as of March 31.), GMAC has the economies of scale not only to employ technology effectively, but also to hire staff with expertise in virtually every area of servicing and every loan product, Mr. Perkins said.
"We see a lot of our clients chasing the market, going to places where the margins are perceived to be better," he said. "We believe we can handle as many products as anybody out there, and more than most."
"We can move with them and service all of those types of products, as well as move up and down the credit spectrum," he added.
GMAC uses Fiserv's MortgageServ platform to automate loan administration, and Mr. Perkins said the Fiserv technology is particularly well adapted to offer full private-label service to clients, so that the consumer does not even know their loan is being serviced by a different company.
The Fiserv platform also facilitates adding and adapting loan products depending upon the needs of the clients, he said.
"In general, it will only take us two or three days to set up a new ARM plan," he said.
GMAC expanded its push into subservicing in 2003, and last year made significant strides in growing the business. GMAC also added executives to focus on managing and marketing its subservicing operations in 2005.
GMAC also said last year that it had become the industry participant that could purchase a correspondent loan with an electronic note, complete the sale of the loan into the secondary market and service the loan. But Mr. Perkins said that while GMAC is electronically enabled, demand for the servicing of e-note loans has been slow to develop. (c) 2006 Mortgage Servicing News and SourceMedia, Inc. All Rights Reserved. http://www.mortgageservicingnews.com http://www.sourcemedia.com