Definition of Loan Servicing is Changing Dramatically

Excerpt of a recent interview I gave to Mortgage Newslink Magazine - http://www.mortgagebankers.org/tools/FullStory.aspx?ArticleId=20978


I think the definition of a servicer is changing dramatically in this day and age. First of all, people are realizing what a servicer does, and it has become a public persona. So we hear a lot about reputation risk or things like that which was not so prevalent in the industry. The servicer is in the crosshairs of a lot of regulatory and compliance kind of issues which has changed the industry dramatically, and we also see the servicer taking on new roles.

The servicer is considered almost like a new originator. When you do a loan modification, you are negotiating rates and trying to look at DTI ratios and things like that which they have never done before. We also see the changing role of the servicer as an asset manager looking at property portfolios, thinking about landscaping, property preservation and things like that which was always there in servicing, but not to the extent that it is today.

With the increased load of non-performing assets and regulatory and public oversight, the servicer is in the crosshairs of a lot of these new roles but they’re locked into servicing fees that they had gotten into a long time back. There has to be a dramatic change in how servicers are paid for the work that they do. There has to be a gradation in the scale, and that’s what in some of the new propositions it is being proposed that all servicers need to get paid commensurate to the amount of work that needs to be done on that loan and not in a general portfolio basis. We almost have to go down to the loan level and say, how much work will this loan need? Well, this is a sub-performing loan, the cost here will be significantly higher and there has to be a more interactive approach. As much as the servicers want to comply, they also cannot lose their shirt on it. ......