CORVALLIS, Ore.-CUs should service their own mortgages: the tools are affordable, and they can ultimately deliver better cross-sales and member service, say proponents of in-house servicing.
"Our mortgage origination and servicing departments have experienced tremendous growth since their inception," which is directly related to the ease of use of mortgage servicing and loan origination systems deployed 23 years ago at OSU FCU here, according to Lyndora Taylor, director of real estate services at the $530-million CU.
"Originating mortgage loans and selling some on the secondary market while retaining servicing is a great way for any size credit union to grow," suggested Susan Graham, president of Dallas-based Financial Industry Computer Systems (FICS). Any CU servicing at least 200 mortgages could "justify the expense of technology and personnel to service in-house," Graham said. "The perfect candidate is a credit union with $300-million in assets that is using PHH Mortgage or some other outsourced servicing company to service about 700 mortgage loans and is paying high dollars each year."
OSU FCU and $180-million University CU in Bangor, Maine, both run Mortgage Servicer, an in-house servicing platform offered by FICS.
University CU creates monthly custom payoff reports from the servicing database to identify which loans have paid off; are paying off early; are refinancing; and where the loans are going, said Kristen Perry, VP-finance and technology. The reports allow Perry to offer new loans to existing members so she can "save a relationship," she said.
"Outsourced servicers provide a standard package of reporting and services, but a credit union might find it expensive to customize reports-or any other aspect of the servicing," added Tommy Turner, managing director at Williamsburg, VA-based Loan Administrator Pro, which provides loan servicing software.
Furthermore, outsourcing forces CUs to "settle for the service level members receive from the outsourcer, which is typically below credit union standards," Graham said, adding that some CUs find themselves spending more time addressing member complaints about the outsourcing service than the time it takes to service the loans in-house.
University CU's in-house system enables a complete range of functions, from escrow administration to collections, investor accounting, payment processing and loss mitigation, said Perry. That way, members can call the CU for any servicing need, instead of turning to a bank, she said.
"Mortgage loans are considered 'sticky' products that typically last seven years, and if the member is receiving statements or other services directly from the credit union on their mortgage loan, they are more likely to add other products," added Graham.
Technology can make in-house mortgage servicing efficient, Taylor continued. "Mortgage Servicer automates the labor-intensive tasks." And data is smoothly transferred from the CU's origination system to the servicing system - a "necessity." This system-to-system integration in particular enables staff to offer more efficient service, she said. "In-house systems are significantly more affordable and run on much simpler platforms than just 10 years ago," said Turner. Infrastructure requirements for a small CU can be as basic as setting up a workgroup on a local-area network (LAN) to share resources and tracking loan information with database software such as Microsoft Access or free Sun Microsystems MySQL, he said.
