It's no secret that with delinquency and default rates rising, servicing costs are going up as well. Some lenders are reporting that their cost per loan to service is up as much as 30% year-over-year.

That rising workload highlights the need for servicers to focus on their core competencies. Activities that fall outside mortgage servicers' core capabilities might be best farmed out to an expert.

Many firms offer outsourcing of specialized tasks to the mortgage industry. Because these vendors focus on a specific area, they are able to accumulate the intellectual capital and technology edge needed to perform their specialized functions rapidly and efficiently. In many cases, this creates a lower-cost option than keeping the tasks in-house for a mortgage servicer.

Just about any aspect of the servicing business has outsourcing options. From loan automation, information management, prepayment protection, and document services to default management, vendors are offering the industry a scaleable way to take advantage of someone else's expertise. In some cases, firms outsource the entire loan administration process to a subservicer.

The tumult currently affecting the mortgage industry provides another opportunity for lenders to assess their current processes and systems. For many, it's likely that the increasing cost and complexity of loan servicing means that they will want to find partners in the business who can manage some of that complexity for them. Outsourcing is also a means to keep overhead down for many lenders. (c) 2007 Mortgage Servicing News and SourceMedia, Inc. All Rights Reserved. http://www.mortgageservicingnews.com/ http://www.sourcemedia.com/