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MortgagePoint » Your Trusted Source for Mortgage Banking and Servicing News 40 November 2023 F E A T U R E S T O R Y 5 TRIGGERS TO SHIFT IN-HOUSE SERVICING TO A SUBSERVICER Could you be getting a better ROI on your servicing portfolio? B y K E V I N C O O K E , J R . E fficiency in mortgage servicing is vital, especially during times of significant change in the mortgage landscape. Changes in the market, such as interest rate shifts, regulatory alterations, or major economic events, can trigger a surge in mortgage applications, refinancing requests, or default rates. An efficient mortgage servicing operation is better equipped to handle these fluctuations, maintaining seamless customer experience, minimiz- ing the risk of errors, and ensuring regu- latory compliance. Moreover, operational efficiency can translate into cost savings, enabling servicers to remain competitive in a challenging environment in terms of service quality and pricing. In an industry where margins can be thin, the ability to swiftly and accurately process high volumes of mortgage-related transactions can make the difference between success and failure. As such, efficiency should be at the core of any decision a lender makes when it comes to their servicing operations, and one of the most impactful decisions is whether their operations should remain in-house or be shifted to a qualified subservicer. This article will explore the five triggers lenders should keep in mind when deciding to shift from in-house servicing to partnering with a subservicer. 1. Portfolio Size and Composition T he loan count of a mortgage servicer is a pivotal factor in deciding whether to continue in-house servicing or utilize a subservicer. For servicers with a smaller loan count, in-house servicing can become uneconomical due to high fixed costs associated with staff, technology, regulato- ry compliance, and infrastructure, which may not be spread over a large enough volume of loans to be cost-effective. On the other hand, servicers with a large loan count may find in-house servicing more viable due to economies of scale, where increased volume reduces the cost per loan serviced. However, in both cases, servicers need to consider other factors such as their core competen- cies, customer service quality, and ability to respond to market changes. The fact is that there truly is no magic number that will tell a lender when they should flip the switch. From a purely eco- nomic perspective, it may not make sense to service your loans in-house until your portfolio is comprised of at least 250,000 loans. But there is more to consider than just the loan count. The type of loans in your portfolio, the location you serve, the size of the loans, and your audience are all components that need to be kept in mind when considering making the switch. These factors all bring a different level of needed efficiency and type of expertise to the table and make servicing loans in-house more difficult. For example, if your servicing portfo- lio is comprised of loans that bring more risk or require more touchpoints on the loan, your loan count "break even" for in-house servicing may be much higher than for your peers whose portfolio is comprised of different loan character- istics. Loan types that might fall under K E V I N C O O K E , J R . , serves as the Head of Strategy and Business Development for LoanCare®. Cooke has 20 years of experience in the financial services sector, where he has developed a specialized talent for building collaborative solutions that deliver significant impact to the bottom line of both clients and service providers. At LoanCare®, Cooke is responsible for expanding lender relationships, building strategic partner- ships, and driving business growth. Prior to joining LoanCare, Cooke was SVP of Strategic Partnerships for Auction.com. He's also held executive roles at Altisource Portfolio Solutions, LenderLive, AMS Servicing, and Mortgage Outreach Services.