As rates remain volatile, lenders and investors will make critical decisions to realize the most significant profit opportunities on their MSRs. Computershare Loan Services' Kelly O'Bannon, Executive Vice President of National Servicing Sales, lends insight into how CLS' expertise helps clients mitigate risk and capitalize on their MSR assets.
Q: Kelly, what challenges are lenders facing now?
A: The origination slowdown has forced lenders to make some hard choices to reduce expenses. Many have entered new markets, focused on purchase volume, and have begun offering other products, like HELOCs and ARMs. At Computershare Loan Services (CLS), we service HELOCs, closed-end seconds, and a range of other products, so we are prepared to help lenders make this shift. The lowest-hanging fruit can sometimes be non-QM and other jumbo loan products. With more people making their living in the gig economy, non-QM creates opportunities for lenders to expand their business.
Servicers will be under more scrutiny as compliance oversight is heightened. We already see it happening across the industry — examination volume and regulator inquiries are rising and will continue. It's like our parents always told us — be prepared! Fortunately, CLS has been doing this for 20 years. We already systematically and proactively review our compliance management system, perform annual compliance risk assessments, and perform servicing reviews on COVID-impacted borrowers. We don't wait for regulators to knock on our door to get prepared – we're always ready to share our data ahead of regulator concern. And frankly, there's a lot to learn from what we see in industry news. Be prepared, monitor recent issues, listen closely to the regulators — pay attention, and act.
Q: What steps should servicers take now to prepare for a potential default surge?
A: Servicers need to be prepared for a potential wave of defaults related to non-mortgage borrower debts and ARM loan payment increases on legacy assets. Lenders that service their own loans must decide if they are operationally prepared to service default loans, financially prepared to absorb advances, and able to comply with investor, state, and federal regulations. We have deep roots in default subservicing and have taken every measure, from building compliance, collections, and loss mitigation teams with top industry talent to providing those teams with rigorous training, loss mitigation technology, predictive analytics & modeling tools. We know how to get ahead of defaults before they happen. Because we are well-capitalized and supported by our parent company, Computershare, these aspects of business are never left under-resourced. It's simply a part of our DNA to protect clients' portfolios at every turn.
Q: How do you expect lenders to shift their retain and release strategies as rates rise?
A: The current environment creates an interesting proposition for lenders. Many will sell servicing to maximize cash flows; however, others will have the ability to retain servicing on a portion of their production and reap the benefits of what could be a long-term cash-flowing asset. Whether lenders retain or release, or both, we can help. As a top MSR purchaser, we provide superior delivery when sellers want to realize the value of their MSR assets at origination. As a prime, default, and interim subservicer, we help clients reduce transaction costs, reduce servicing expenses, and serve borrowers well throughout the lifecycle of their loan. Our recent ratings from Moody's, Fitch, and S&P agree that CLS's continued investment in management, servicing, and growth models offers clients and borrowers a better experience.
Q: How can lenders/servicers benefit from hiring a subservicing partner in this rate environment?
A: Now is the time to find the right subservicing partner — one that is fully prepared to address the unique challenges of this rate environment. Our people, technology, and processes support proactive outreach to borrowers that exhibit signs of financial stress. With an average six-month cure rate of 54.8% on loans transferred in at 60+ days delinquent, our entire philosophy is centered on protecting servicing assets and creating a longer-term value for lenders and investors servicing books.
To learn more about how CLS can help your business thrive, contact Kelly O'Bannon or visit www.computershareloanservices.com/us/business/servicing/overview.
Computershare Loan Services (CLS) has 20 years of experience protecting clients' portfolios. They operate as a Tier 1 Ginnie Mae and Federal Housing Administration (FHA) servicer and are approved by Freddie Mac, Fannie Mae, the U.S. Department of Agriculture (USDA), and the U.S. Department of Veterans Affairs (VA).
CLS is a proud recipient of Freddie Mac's GOLD Servicer Honors and Rewards Program (SHARP)SM award—reserved for the top subservicers in the US. CLS continues to receive Fannie Mae's Servicer Total Achievement and Rewards™ (STAR™) Performer recognition year over year.