loanDepot announced this week that it will begin servicing Ginnie Mae loans in-house, following a 2021 decision to do the same for Fannie Mae and Freddie Mac-backed loans.
The top-ranked nonbank lender said in a press release that servicing Ginnie Mae loans “carries great significance” because the agency is the primary guarantor of securities containing Federal Housing Administration, Department of Veterans’ Affairs, and United States Department of Agriculture loans.
Dan Binowitz, executive vice president of servicing and capital market operations at loanDepot, said in a statement that the move will enable the nonbank to “provide the best-in-class care and service…from initial consultation through servicing for the life of [the loan].”
“We’re relying less on third party subservicing partners, which streamlines the process and allows us to work directly with our customers so we can offer the outstanding service that they expect and deserve,” he said.
For months now, the California-based lender has been developing its home loan servicing platform, announcing in November the addition of new functions and features meant to streamline and enhance a borrower’s experience.
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Updates include enhanced online payment capabilities, secure messaging and new paperless document options, loanDepot said.
“Our goal is to ensure the payment and account management process within our servicing portal is as simple, intuitive and secure as our customers demand it to be,” said Binowitz.
According to Joe Garrett, mortgage consultant at Garrett, McAuley & Co., bringing servicing in-house could be a strategy lenders employ to retain more cash flow. Finding places to trim becomes more important as rates rise and margins narrow.
“Subservicers, they do all the work, but they get paid a lot of money,” Garrett said. “They can take anywhere from 23% to 30% of servicing revenue to do the work and it looks like loanDepot decided that they can do it more effectively and cheaper.”
The cost of subservicing, subservicing oversight, regulatory penalties, plus the loss of a lender’s client base due to recapture and retention problems could all push a lender to cut ties with their subservicer and bring servicing in-house.
“A big piece of the discontent could be that the lender wants to be on the frontlines of keeping and maintaining its client base,” said Courtney Thompson, founder of mortgage servicing advisory Consigliera.
Developing those processes internally can be difficult, however.
“It’s really hard to set up a servicing shop, particularly with the challenges legacy technology and the regulatory environment brings,” Thompson said. “And I think that no decision maker would do this, unless they really saw a better total economic benefit, and have a lot of faith in their servicing team.”
As well as building out its servicing platform, loanDepot is also hiring personnel across its servicing organization.
In a notice posted in November, the lender said it is looking for customer service representatives and advocates.
“The team comprises everyone from seasoned mortgage professionals to entry level individuals, who are responsible for providing best in class customer care while assisting customers with general mortgage inquiries following the origination process. They work with customers and internal teams to provide quick and effective solutions,” loanDepot said.