Have you ever considered having your portfolio subserviced? Or, have you thought about using your staff and operations to subservice for others? Before you embark on either of these directions, you need to understand what subservicing is all about.
There are considerable differences between a servicer and a subservicer, as you might imagine.
As a servicer, you service your portfolio generally according to Federal Agency standards. However, you make a lot of other decisions based upon your specific company needs. You develop the reports needed by your senior management team, your board, and your investors to manage the daily activities of the portfolio. You handle the default process based on your own default management guidelines and perhaps offer loss mitigation alternatives on your owned portfolio based on criteria acceptable to your credit policy committee. You handle escrow for your portfolio, e.g. you analyze all loans in your portfolio based upon a predetermined basis, which selects loans by state with a consistent methodology. And, most important ly, you provide exceptional member service all of the time. At all times, you handle the servicing activities consistently with one set of standards which YOU define and live by until you need to change them. But YOU service your own portfolio well.
Acting as a Subservicer
As a subservicer, you must do all of these things, for each of your clients, recognizing that they will differ based on their individual requirements.
The subservicing business starts and ends with the member.
- Can you provide a private label experience to the member, the end mortgagor, for your client?
- Can you deliver call statistics, turnaround times, performance measures, and high quality contacts with the member?
- Can you support multiple member contact management programs?
- These are significant issues to manage that require a strong relationship management program to assure that your client and their members receive the required support from your subservicing operation. A private label program will require you to be able to service the loan in your client’s name via letters, coupon books or monthly billing statements, notices, year end statements, and all other member contact activities.
The subservicer will need to be able to also deliver an enhanced member experience that is beyond the typical phone contact. You will have to provide 24 x 7 member support. Many of the companies utilizing a subservicer are not only delivering a website for member information access, they are also customizing the site to cross sell the member their products and services. Many credit unions that are subservicing offer members the ability to make payments in their branches, so you will need to be able to deliver a branch payment processing system as well.
In addition to the superior member service that you will deliver as a subservicer, you will need to be able to support your client’s varied reporting and accounting needs. In addition to providing all of the normal accounting and default reports to the investors, you will also need to develop management reports for each of your clients. You will be required to interface with a variety of general ledger systems, asset liability systems, profitability systems, CIF systems and a host of other third party systems that your client utilizes to service their portfolio.
Questions for Potential Subservicers
These are some of the difference between being the servicer and the subservicer. If you are considering having someone subservice your portfolio, you should be thinking of a few more things.
- Does the subservicer compete with me for business in any way?
- Are they in my marketplace competing for deposits, loans, or other services?
- Does their business plan match my business plan?
- Is subservicing a core business and therefore are they committed to my portfolio and my member?
- Is the subservicer owned by Credit Unions and do they offer Credit Union focused solutions?
- Do they really know what member service means?
- What about their technology? How are they improving their service delivery channels? And lastly, and probably most importantly, does the organization that will be servicing your portfolio (down to the last manager) really understand the difference between servicing and subservicing?
After all, it’s your member, not theirs.