Subservicer’s OCC settlement could shift business, affect capacity

The recent placement of regulatory constraints on one subservicer could redistribute some of its business, and that’s a mixed blessing for its peers, according to panelists speaking at an industry conference.

“I think that it removes capacity,” Christopher Sabbe, senior vice president at PHH Mortgage, said at the Information Management Network’s Residential Mortgage Servicing Rights Forum in New York. Any resulting shift in business as a result of the terms of the Cenlar settlement will likely need to be distributed to multiple players, he noted.

That could be both an opportunity and a challenge for a roughly $3.6 trillion subservicing market that’s anticipated to keep expanding by another $1 trillion-$1.5 trillion over the next couple years, Sabbe said.

Servicing is becoming increasingly complex as unique but potentially temporary forms of loss mitigation are coming into play as pandemic accommodations end. This is prompting a growing number of mid-sized players to outsource their business.

“We expect that to continue,” said David Allison, senior vice president at Dovenmuehle Mortgage.

Growing numbers of borrowers exiting payment suspensions put in place for coronavirus hardships and a national ban on foreclosures at an end and replaced by transitional rules may be among the reasons why.

Subservicers are expecting borrowers in the midst of both evaluations for modifications to loan terms and transfers to be the most compliance-sensitive task they’ll have to handle as forbearance ends. Mods constituted 13% of overall loan outcomes overall in the Mortgage Bankers Association’s latest forbearance survey, which reflects the week ending Oct. 17.

While outsourcing has been increasingly attractive to medium-sized servicers recently, it hasn’t always been a match for companies that prefer more control over their customers, said Allen Price, senior vice president at BSI Financial, likening it to dating. Companies should be prepared to ensure they’re ready to work with a business partner and do things like ensure call centers are ready to coordinate with subservicers when inquiries come in after transfers.

“It has to be a cultural fit,” he said.

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