The Mortgage Bankers Association's servicing conference here last week was appropriately called "Drivers of Change."
The home mortgage servicing business is undergoing a metamorphosis driven by the recent merger frenzy, a new accounting rule, rapidly changing technology, and a renewed interest on the part of commercial banks.
In the opening session, MBA president-elect Ron J. McCord said that besides changes in the names of the top players, there are other obvious shifts in the servicing field.
"Nothing else will fundamentally and dramatically change the face of this industry more than technology," Mr. McCord told the attendees.
Other changes are also bringing challenges to mortgage bankers.
The importance of a session about managing the relationship with the parent company was brought home when a scheduled panelist was called home. According to those present, William Glasgow Jr., executive vice president at BancBoston Mortgage Corp., was called back to the office by the parent Bank of Boston. And an executive attending the session also had to leave early, he said, to attend to business for his company's bank parent.
Al Heathcox, executive vice president at Regions Mortgage Inc., Montgomery, Ala., said the key to a good rapport with a bank parent company was communication and knowing where the mortgage unit fits in with the bank's business strategy. He said he had devoted two customer service people to answering questions from the 44 bank presidents he must deal with.
The unit also puts out a newsletter about hot issues, in an attempt to address possible questions before they are asked.
Mr. McCord, who in addition to his role in the MBA is chairman, president, and chief executive of American Mortgage and Investment Co., Oklahoma City, said he strengthens his relationship with the owners of the closely held insurance company he is partners with by familiarizing its executives with the mortgage industry.
"I encourage you to get them involved," Mr. McCord said. He has done this by bringing his business partners to MBA events over the last seven years.
While commercial banks buy servicing to achieve economies of scale - servicing more loans for lower costs - smaller servicers can stay alive by creating a niche for themselves, other speakers told the conferees. For example, servicers can specialize in loans to credit-impaired borrowers, reverse mortgages, or subservicing.
Because of increasing product complexity, some servicers are choosing to outsource certain types of loans that subservicers handle well, said Robert M. Clements, executive vice president at Alliance Mortgage Co., Jacksonville, Fla.
But he said there are also disadvantages to outsourcing servicing, such as losing control over a client base. The servicer must still deal with the risk and in addition maintain a relationship with the subservicer.
Subservicers also face challenges, Mr. Clements said. There is a high demand for customized services, a need to continually update and invest in technology, increasingly complex products, and reduced profit margins because of competition, he said.