Study Shows Subservicing Industry Gaining Popularity
The MBA annual cost study suggests that subservicing has become an increasingly popular option for loan administration, especially among smaller lenders.
The annual MBA cost study found that 0.55% of loans were subserviced by others among study participants last year. But that range varies dramatically according to the size of the firms.
Among the smallest category of companies in the study, those with portfolios of less than $50 million in loans, lenders outsourced loan administration for almost 15% of their loans. Lenders with portfolios of $50 million to $299 million had subservicers handling 9% of their loans, and firms with $300 million to $1.5 billion sent 6% of their loans to subservicers.
By contrast, lenders with $10 billion or more in servicing outsourced loan administration on just 0.54% of the dollar volume of their portfolios.
In fact, the average firm with a servicing portfolio consisting of less than $50 million of mortgages spent more 16 times as much on subservicing as the typical firm with a portfolio of more than $10 billion.
Last year, the MBA cost study found that the percentage of loans subserviced by others doubled between 2002 and 2003. In 2003, lenders reported that 0.67% of loans on which they owned servicing rights were subserviced by others. That compares to 0.26% one year earlier. However, the subservicing rate remains below the recent peak of 1.05% reported in 2000 and can vary significantly from year to year.
Lenders also reported paying higher fees for subservicing in 2003 than they had in 2002 and earlier years, again suggesting greater use of subservicing as an option for loan administration.
The MBA revised its servicing measures this year to provide a better understanding of both operational servicing income and financial results related to loan servicing. Marina Walsh, director of industry analysis in the MBA's research department, said the methodology was also changed to better reflect the economics of subservicing, with subservicing fees being netted out from the calculation of net servicing income.
Personnel expenses accounted for 48% of direct servicing costs, according to the MBA cost study. The average salary of loan administration personnel, including benefits, was reported as $38,928, down sharply from an average of $49,125 in 2002, according to the study. However, the 2003 average was in line with averages from 2000 and 2001. (See related story from Dec./Jan. issue of MSN.)
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