Subservicing Set to Grow When Volume Comes Back?

Screen shot 2010-04-26 at 8.39.18 AM.pngMortgage Orb writes that while the reverse mortgage sector has been one of the few bright spots within mortgage banking, the subservicing aspect of the business has yet to take off.

Darryl Hicks, VP of communications for the National Reverse Mortgage Lenders Association tells MortgageOrb that part of the problem regarding the lack of subservicing activity in the sector can be blamed on the nature of the sector.

“To begin with, there are not a whole lot of people servicing reverse mortgages,” he explains. “This is still a small sector. We’re not a large industry, and the pace of origination flattened off in the past two years, so there is not a growing need for subservicing.”

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Gordon Albrecht, executive vice president and chief strategy officer at FCI Lender Services Inc., in Anaheim Hills, Calif., believes that more subservicers could begin streaming into the sector.

“Reverse lending, as presented to us, has a reasonable servicing fee built in by the originator,” he says. “Then, we do the servicing at our lower subservicing fee. The originator gets a spread for income, we get our standard subservicing fee and the borrower gets professional servicing statements each month. It looks like it should work for everyone involved.”

To read the rest of the article check out the link below.

Subservicers Find Open Niche In Reverse Mortgages

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  • There is little question that the monthly servicing fees charged to HECM borrowers exceed the fees most subservicers charge. This is not news to reverse mortgage lenders. However, more and more that fee is now being compensated through the interest rate rather than a separate fee charged to new borrowers (particularily on new fixed rate HECMs).

    On HECMs originated prior to 2010, it was easy for subservicers like Gordon to clearly show that if the lender is collecting $25 per month and Gordon is charging $8, why sell the servicing rights? In most cases the cumulative monthly cash flow will quickly exceed the selling price of the servicing rights. Instead why not just keep the servicing rights and make an extra $17 per month by using the services of a firm like Gordon's?

    Here is another place where our industry will begin looking more and more like the forward mortgage industry.

  • “Subservicing Set to Grow When Volume Comes Back?”
    “Volume comes back is when home values come back”…Its going to be a long wait for the subservicing!

  • There is little question that the monthly servicing fees charged to HECM borrowers on vast majority of HECMs originated before 2010 exceeded the fees most subservicers charge. This is not news to reverse mortgage lenders. However, more and more that fee is now being compensated through the interest rate rather than a separate monthly fee charged to new borrowers (particularily on new fixed rate HECMs).

    On HECMs originated prior to 2010, it was easy for subservicers like Gordon to clearly show that if the lender is collecting $30 per month and Gordon’s firm is charging $15, why sell the servicing rights? In most cases the cumulative monthly cash flow will quickly exceed the selling price of the servicing rights. Instead why not just keep the servicing rights and make an extra $15 per month by using the services of a firm like Gordon’s? rnrnThe issue is different and more difficult to justify when the amount due the holder of the servicing rights is calculated using basis points. Of course the greater the balance due, the greater the servicing fee income to the lender retaining the servicing rights. So loan size could and will come into play — more so than in the past. What justifies higher fees for higher balance due HECMs is difficult to perceive since the work is substantially the same on both.

    Here is another place where our industry will begin looking more and more like the forward mortgage industry.

  • “Subservicing Set to Grow When Volume Comes Back?” rn”Volume comes back is when home values come back”…Its going to be a long wait for the subservicing!

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