The subservicing business that acquirers have been setting their sights on depends on demand for work with third parties, which begs the question of how popular the strategy really is now.
A recent Stratmor survey shows that subservicing acquirers like
The survey found that 52% of the senior executives from 68 mortgage lenders who responded said their companies exclusively subservice. Another 24% of the respondents, who collectively are responsible for 9.8 million loans, use a hybrid mix of in-house and third party operations.
That suggests only 24% of the market may have no need for subservicing, with 17% of the respondents saying they keep operational completely in-house. The remaining 7% reported they sell off their mortgage servicing rights.
With demand for subservicing established, the question for those investing in the business then is what they need to do to compete for business. Stratmor's survey points to the answer to that too.
"Lenders want a subservicer they can trust with the borrower, the brand and the operational complexity of servicing," Stratmor Senior Partner Nicole Young said in a press release.
The competitive landscape
Most, or 83.3% of those that do work with subservicers said they would ideally work with just one, Stratmor found.
That means some lenders are making all-or-nothing choices about subservicing when possible and prudent as recent earnings reports show some players have been making changes.
The competition raises the possibility of price compression for subservicers but Stratmor reports that its survey shows lenders value experience with borrowers and consumer satisfaction more.
Most, or 80%, identified an improved borrower experience as a top driver of a potential subservicer change, compared to 76% who put a competitive price in that category.
However, lenders answering the survey also said that they want to ensure that the borrower's loyalty stays with them, with 71% reporting that they are more wary of subservicers that originate.
A little over half or 51% of respondents would prefer their subservicer to have "a modern platform designed for modern" automation but the share stating they would rather have "an established platform with a proven track record" was almost equal.
In a ranking of barriers to switching subservicers, respondents put operational disruption at the top of the list, followed by the cost of the transition, internal resource constraints, borrower impacts and the need to communicate with them, data migration and executive approval.
Operational and loan performance improvements ranked well behind borrower experience and pricing among top drivers of subservicer change, with 41% putting stronger technology integration in that category, followed by loss mitigation and delinquency improvements at 36%.
The same share of respondents (36%) called higher quality client support a top reason to change subservicers, with 32% putting enhanced reporting and analytics in that category, and just 24% saying improved retention capability would be a reason to switch.
The terms of the contract and its flexibility were at the bottom of the list with 20% calling this a top reason to consider changing subservicers.
