FAIRBORN, Ohio-Credit unions simply don't have the time and money - or technology and expertise - to service their own mortgage loans, according to a number of CUs and vendors.
In-house servicing would cost twice as much per loan to provide borrowers with the same functionality as outsourced servicing, said Tim Mislansky, SVP at the Wright-Patt CU here and president, Wright-Patt Financial Group, which manages servicing for more than 60 CUs through its myCUmortgage subsidiary.
The $1.7-billion Wright-Patt CU has outsourced servicing for a decade, switching vendors one year ago to CU-owned Prime Alliance Solutions of Tukwila, Wash., on a platform powered by Cenlar, a Ewing, N.J. subservicer.
The flood of mortgage defaults in today's market makes outsourced servicing the best choice, Mislansky said. "Default management is crucial. Cenlar's expertise helps limit the number of foreclosures." Prime Alliance also steps in as expert on new government programs, such as the Home Affordable Modification Program, he said.
There are technology advantages to outsourcing, he said. Prime Alliance provides "more sophisticated risk analysis technology and automated outbound calling systems" than what the CU could afford.
Today's regulatory maze can be a trap for even the bravest of in-house servicers, Mislansky continued. "The compliance burden is becoming so overwhelming that a credit union large or small is better suited to an outsourced partner."
TruHome Solutions, a mortgage CUSO in Lenexa, Kan., agreed: "we service loans in all states, so using an outsourced vendor saves us from hiring additional staff," said Scott Taylor, servicing manager. That's because "we can limit the need to stay current on the ever-changing laws and regulations across the country. Our risk is minimized."
TruHome's outsourced servicing is a success; the CUSO services approximately 2000 loans per full-time employee, which Taylor said is above industry standard. "I don't believe there would be an advantage to servicing in-house," he said. TruHome manages a portfolio of more than $1 billion for multiple CUs by outsourcing servicing to Houston-based IMS, a collateral protection resource for the mortgage servicing industry.
Outsourcing is the right solution for Wright-Patt's diverse portfolio, said Mislansky. "Our portfolio had grown significantly and was becoming more complex in terms of products and investor needs."
"The more diverse a lender's mix, the more complex servicing becomes," agreed Dan Green, EVP-strategy, Prime Alliance. There's FHA lending, for example, which now accounts for about 30% of the market every month, he said. "This is a borrower demographic that should be very interesting to credit unions as we work to lower the average age of membership. Yet servicing these loans is more difficult than servicing standard loans."
Challenges include adhering to federal, state and local regulations. "Compliance is a big part of what outsource providers offer; those who choose outsourcing are often buying peace of mind," Green said.
Outsourcing provides strength in numbers, added Cheryl Lang, president and CEO, IMS. "There's no need for a credit union to spend time and money reinventing a contractor network when a trusted third-party certifies and maintains one. Credit unions should capitalize on the economies of scale a vendor can provide."
An outsourcer can deliver experience, she continued. "In-house servicing provides a false sense of security. Just because interaction with a member occurs under your roof doesn't mean that member is receiving the best service. The people most qualified to take care of the servicing needs of your borrowers should interact with them. By working with IMS, credit unions are not tasked with finding servicing professionals, training those employees that may be changing job-focus and then right-sizing staff depending on volume."
A good outsourcer can make it easy for CUs to access their loan servicing data for marketing purposes, said Green. "Moving data seamlessly between systems has never been easier."
For more information
Wright-Patt CU www.wpcu.coop
TruHome Solutions www.truhomesolutions.com
IMS www.imstoday.com
Prime Alliance Solutions www.primealliancesolutions.com
More @ cujournal.com
Read more about how to gather and use member feedback at cujournal.com and searching the following bolded terms in the archive:
How the Golden 1 Works to Reduce Its Risk-September 14, 2009
How Two CUs Are Using Existing Tech to Handle Surge in Loan Mods-June 29, 2009
How Mortgage Servicing Helps Mid-Size CU Be Top 10 Lender-September 22, 2008
