• Dr. Andy Schell, DBA (Ph.D.), MSML, MBA, CPA/CFF, CMB

About Mortgage Servicing

Mortgage Servicing:

  • Is Highly Complex & Highly Regulated

  • Is Highly Dependent on Workflow & Scale

  • Requires Extensive Procedures & Training

  • Is a Contractual Obligation with an Investor: Mortgage Servicing Right (MSR)

  • May generate a Return on Investment of 200%. (Measured as MSR IRR)

"Residential Mortgage Loan Servicing is one of the most profitable areas of mortgage activity and presents a series of repetitive tasks that are highly dependent upon a complex workflow design where each function relies upon each members’ ability to precisely complete each task to achieve profitability and to avoid financial, regulatory, and reputational risk present within each activity." by Dr. Schell

Servicing Functions with a Subservicer:

  • MSR Analysis: Retain vs Release Decision

  • Subservicer Management

Servicing Functions without a Subservicer:

  • Customer Service & Boarding / Transfers

  • Payment Processing & Escrow Analysis

  • Cash Management &Accounting

  • Investor Reporting & Payoff

  • QC / TQM & TPM - Vendor Oversight

  • Collections & Loss Mitigation, Short Sale

  • Foreclosure, DIL & Property Management

Servicing Process Overview

  • Collect payments from borrowers (ACH, Check)

  • Each payment has P&I and maybe T&I

  • Servicer receives and segregates Investor Funds as required

  • Remit Interest and Principal less Service Fee to Investor

  • Advance Funds to Investor if required

  • Agency retains guarantee fee then remits P&I to MBS security holders

  • Servicer holds Borrower's Escrow Funds per RESPA (1/6th rule)

  • Pay Borrower’s Tax and Insurance obligations when due

  • Analyze Escrow activity to assess Escrow reserve amount

  • Notify the customer of the new payment amount

  • Servicer implements Collection, Loss Mit, and Foreclosure

  • Collection activity may start on day 2

  • Modification efforts are required

  • Foreclose is state-specific

  • Property Preservation is Investor specific

  • Servicer implements Quality Control and Quality Assurance

  • QC is performed Quarterly applied to all Agency and HUD portfolio loans

  • QA is implemented perpetually from QC to correct, identify root cause, and remediate

Dr. Andy Schell & Theresa Marie teach Servicing as an MBA Webinar.

Prior recordings may be purchased at MBA.org.

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