HousingWire recently spoke with Selene Finance‘s Chief Revenue Officer John Vella about the ways subservicing can help lenders and servicers going into 2022.
HousingWire: What about 2022’s anticipated market makes subservicing a particularly good opportunity for lenders and servicers?
John Vella: With production volumes flattening out and non-QM originations increasing, the need for originators to focus resources and cost on the front end of the business could lead to more subservicing opportunities. Midsize lenders are prime candidates in this market to subservice while providing servicing oversight to a subservicer who has the infrastructure and expertise to manage the flow of originations.
Another growth area for subservicing will be in the special servicing category as loans come off forbearance and non-QM originations grow. Servicers and originators will look for delinquent loans to be managed by a special subservicer who has the portfolio management infrastructure to manage credit risk.
HW: How have the past two years shaped the way lenders and servicers view subservicing?
JV: With the pandemic and the new administration, lenders and servicers are viewing it with more scrutiny. The emphasis on borrower interaction, compliance and credit risk management has never been more in the forefront.
As lenders and servicers look to subservicing, they need transparency, experience and a personal touch to their portfolios. The days of placing all the loans in a pooled environment with a philosophy of treating all the loans the same way does not work. Lenders and servicers are looking for partners who can manage loans like they were their own loans, with skin in the game.
HousingWire: What are some of the key challenges lenders and servicers face pertaining to servicing and how does subservicing help overcome them?
JV: Lenders and servicers want to focus on originations, borrower retention, loss mitigation and regulatory compliance. To do that effectively, the infrastructure needed can be costly, resource intensive and complex.
By utilizing a subservicer, the lender or servicer can provide oversight while setting performance indicators to monitor. This will put the loans in the hands of an established subservicer with the proper infrastructure in place to effectively manage the portfolio.
HW: From a lender perspective, what are the advantages for the borrower if a lender partners with a subservicer?
JV: The borrower is the No. 1 focus of the subservicer, with the goal to provide best-in-class service to respond to borrower needs while retaining them as a customer. Their ability to answer calls and respond to requests in a timely manner and help the borrower if they are having payment issues is the responsibility of the subservicer.
The proper partner will make sure the lender is comfortable with their approach to retain the borrower while ensuring proper performance targets are maintained as set by the lender. From the time the loan is boarded, the subservicer will be in constant support of the borrower to ensure all their needs are met.