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In-house servicing vs. subservicing: How you’ll know when to make the switch

There comes a time in every mortgage bank’s life when they need to make a crucial decision: Do we keep our servicing in-house or engage a subservicer?

Depending on your circumstances, there may be benefits and drawbacks to each approach. Keeping your servicing in-house may seem to give you more control — more visibility into your portfolio, more say over how your customers are treated. Plus, if you’re managing your own servicing at an adequate level, you might be reluctant to give control to a subservicer.

On the other hand, servicing is a very tricky business. It’s besieged by regulations that are constantly changing based on the shifting priorities of legislators — from your local regulations to state, federal, CFPB, GSEs, the investor, FHA, VA, or USDA. Your servicing relationship with your customers is a central piece of the customer experience (even if it isn’t always treated that way), and it can be very difficult to keep yourself on the right side of legality while also giving your customers peace of mind.

TMS started as an originator, giving us a full understanding of the needs and pain points of originators. After entering the subservicing business, we came to fully appreciate how complex servicing was — and how much, therefore, it demanded to be a standalone function. Engaging a subservicer may not make sense for everyone. But especially for lenders with fewer than 100,000 loans on their books, it can help you mitigate risks and capitalize on opportunities in a way that in-house servicing struggles to.

Your goal is to grow your business. As such, you will be evaluating all avenues that support profit and sustainability including the servicing of your loans. Whether you do this via in-house servicing or using a subservicer will depend on several key factors.

Pressures to Weigh When Considering a Subservicer

  1. The pandemic has been nothing short of a rollercoaster from a compliance perspective. What started with a loosening of regulations transitioned into an abrupt tightening of regulations as Presidential administrations shifted. At the time of writing, the Consumer Financial Protection Bureau (CFPB) is beefing up its technical expertise to make its investigation methods more powerful and sophisticated.For financial institutions, this means more pressure than ever to stay compliant — to stay up-to-date on the most current regulations and on the CFPB’s enhanced auditing and investigation methods.
  2. Data Quality (Currency and Accuracy). In our digital age, the most competitive companies are the ones who generate and leverage the most high-quality data. This applies across all industries: Not only should you have leading-edge tools that capture customer data, but you should also be able to turn it into rich business insights.In-house servicing means you’ll either have to develop these tools yourself or bet on your team becoming experts with third-party business intelligence tools.
  3. Relationship Management. Depending on your business model, numerous entities will monitor, surveil, and regulate your activities. That could mean regulatory bodies like the CFPB, government-sponsored enterprises like FNMA, FHLMC, GNMA, HUD, or private investors who want to verify the quality of their investments.Managing these relationships depends on preparation and communication. Each relationship will be strengthened by up-to-the-minute data and a regular cadence of meetings. Alternately, each relationship is threatened by slow data delivery and limited partner visibility.
  4. Customer Experience. A consequence of giants like Amazon and Apple providing elite customer experiences is that people have begun to expect similar ease and convenience from every company — regardless of industry. For homeowners, this means not fretting over the complexities of mortgage management and having a relationship with their servicer that makes the process easy (dare we say, enjoyable).

While these are the four most acute pressures that apply to servicing, it’s still only a sample. Some institutions may be able to manage each of them alone. But for most, there are numerous benefits to engaging a subservicer whose entire responsibility is handling them for you.

TMS: A Pressure Release Valve

TMS has a proven track record of relieving these pressures and more:

  • Compliance: We go through all the same audits that all subservicers do, and auditors regularly report no repeat findings. We’ve even earned special praise from FNMA, GNMA, and many state regulators on the quality of our Compliance Management System and the ease of our audit management process. All of which is to say, in TMS, financial institutions have compliance security.
  • Data Quality: With SIME (Servicing Intelligence Made Easy), we were the first to bring high-class tech to subservicing. SIME gives lenders 24/7/365, real-time, fully transparent views into their loan portfolios. It also includes an archive of all customer calls and interactions, KPI/SLA portfolio performance, and more — all branded to your corporate identity.
  • Relationship Management: A compliant, data-rich institution is one that’s prepared to answer to entities like the CFPB, FNMA, GNMA, and investors. And the answers aren’t just satisfactory — they’re exactly what these bodies want to hear.
  • Customer Experience: In addition to top-tier tech, TMS has a fleet of customer care specialists — whom we call CAREologists — whose sole job is to grow happiness with your customers. Across hundreds of hours of training, CAREologists get both the technical expertise and bedside manner to provide an elite customer experience.

It’s no wonder TMS has a 99% customer satisfaction rate, a 91% first-call resolution rate, an 84% Net Promotor Score, and under 60 seconds call wait times.

True Business Partnership

When you engage a subservicer, you’re looking for someone who will give you peace of mind by offering full transparency into your portfolio, while always collaborating with you as a true partner. Someone who enhances your brand by treating your customers the way you’d treat them, someone who keeps you insulated from compliance risks, and someone who helps you tackle the challenges that shape your fate. This is what TMS provides — and more.

Ready to put an end to sub-par servicing? Contact TMS Subservicing today.

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October 6, 2022