Navigating Sub-servicing Challenges

On April 19, the Five Star Institute presented its latest webinar discussing the benefits of sub-servicing, how to navigate and ensure compliance with government regulations, and on how to maximize ROI for all parties.

The free-to-attend webinar was sponsored by Selene Finance, a specialty loan servicer, offering full-service capabilities supporting all aspects of residential mortgage servicing. 

Moderated by David Wharton, Editor-in-Chief of DS News, it featured a roundtable-style discussion from three speakers: Marcel Bryar, Founder and Managing Director of Mortgage Policy Advisors, LLCJT Grubbs, EVP of Loan Servicing at Selene; and Candace Russell, VP at Carrington Mortgage Services, LLC. 

The first question, tossed to Bryar to start out the session, was, “When looking at the landscape and everything that is in play, how does subservicing become more cost effective? What’s the key to making sub-servicing differentiated and worth it?” 

Bryar responded that there are a lot of distinguishing factors between servicing and sub-servicing. 

“The skillset that goes into servicing … is a very unique skillset. It is very specific and incredibly complex,” Bryar said. “I think one of the opportunities for mortgage firms is to take a look at if you are owning your own servicing and owning your own originations, do you really need to do both or would you be better off focusing on one?” 

“Some firms have decided … that they’re going to focus on originations and depend on someone else to do their sub-servicing. And there is a value in focusing on one thing at a time and doing really well at that one thing,” Bryar continued. “Sub-servicers specialize in servicing loans and addressing all of the complexity of doing that, and again, requires a different set of skills, a different culture, a different mindset of one that you see brought into mortgage originations. You don’t have to do both.” 

“To me that is key, there are a variety of reasons why sub-servicing makes sense, but to me that is a basic fundamental and a good reason for moving to sub-servicing.” 

Later, the moderator asked Russell to speak on the importance of hedging in portfolio management. 

“I can tell you that your portfolio makeup and hedging your portfolio and making sure of who you are and what you want to be particularly in this new and evolving environment,” Russell said. “Do you want to maintain your servicing?” 

Russell continued by saying that companies need to look at things like sub-servicing rates, staffing levels, basis points, and cost-of-service for loans and decide the right mix for them. 

“Looking at your portfolio, if you know who you are and who you want to be, you just have to weather the storm,” Russell concluded. “But if you don’t really know what you want to be yet, I think it’s beneficial for you to look at your portfolio split and say ‘is this really the mix for what I want I think I need in returns.’ And maybe you think you need more private loans, maybe you need to be higher GSE population. To hedge things like higher touch government loans.” 

The rest of the one-hour webinar included many more questions, polls, and questions from the virtual audience. Click here to view the webinar. The webinar is free, but registration is required.

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