Subservicing's Future

With loan origination volume slowing down, lenders are paying increasing attention to ways they can hone their focus on core competencies and trim expenses. For some, that may mean outsourcing functions that can be better performed by a specialist. And subservicers are offering their expertise as one way for lenders to take advantage of the latest technology and expertise in the loan administration field.

While portfolio churning has been rampant over the past three years, the overall volume of mortgage debt outstanding has been growing as well. That's a function of record-breaking home sales and rising home values. And it means that the mortgage servicing business has been growing as well.

As a result, subservicers have seen their business opportunities grow. And as more and more mortgage companies reconsider how they do business, that trend may continue.

To reach new clients, subservicers are adding to or refining their product offerings so they can handle more loan products and respond to changes in the mortgage market. They are also enhancing technology and creating new alliances in order to reach a broader customer base.

Consolidation still affects the mortgage servicing business. But industry profitability studies still show that small and midsized lenders are holding their own when it comes to managing the bottom line. And in many cases, these are the companies that turn to a subservicer to help manage the loan administration business.

Small banks, thrifts, credit unions and other lenders that want to maintain a relationship with their customer and keep their own name infront of the consumer often rely on a subservicer, working on a private-label basis, to manage loan servicing. We expect that trend will not only continue, it will grow.

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