Special Report: Sub Servicing

A lot has changed in the business of servicing mortgage loans for other parties. In recent years, new players have moved in. Old players have moved on. And some of the stalwarts, like Dovenmuehle Mortgage, just keep quietly adding to their business. Through all the changes that have taken place in the mortgage industry, one constant is that the subservicing business seems to keep growing. In the third quarter of last year, the 20 largest subservicers managed 372 billion of loans for others. That was a whopping 69% increase from a year earlier, according to statistics compiled by our Database Products Group.

Some of that growth is a bit of an anomaly. Washington Mutual technically was subservicing most of the loans it acquired from HomeSide lending, but since the third quarter WaMu has purchased that portfolio. That will likely lead to a technical decline in subservicing once the formal acquisition of the HomeSide portfolio is added to WaMu's ownership.

But it is interesting to note that all of the top 20 subservicers manage more than $1 billion of loans for others. And eight have subservicing portfolios greater than $10 billion.

The business is growing because increasingly lenders are focusing on their "core competencies." For many companies, that means things other than loan administration.

But while many small and midsized lenders have exited the servicing business by selling their portfolios, others want to hang on to the customer relationship. They may want a specialist to perform the work, but they want to own the customer relationship.

Subservicers have stepped in to fill this niche. More often than not, subservicers these days offer their services on a private-label basis, so that the consumer doesn't even know that someone other than their lender is managing the monthly payment on their mortgage loans.

The business has evolved into a highly sophisticated, technology driven component of the mortgage industry. There may be blips in the aggregate volume of subservicing down the road, but we expect the long-term trend will continue - subservicing is a business that will keep growing.

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