Rethinking Loan Servicing

Prime Alliance Solutions
July 15, 2010 | COMMENTS

The mortgage lending landscape has changed drastically over the past several years from virtually every perspective.

The effects are far reaching, yet the impact on obtaining new loans gets more attention than how older, existing loans are managed and serviced. Mortgage loan servicers have had to expand their infrastructures and their capabilities in order to meet new and increasing regulatory requirements, as well as consumer demand for assistance with modification, pre-foreclosure assistance, and, when it can't be avoided, foreclosure itself.

The implications of these changes, especially those related to loan servicing, should interest credit unions.

There has never been an opportunity like the present for the credit union industry to take its rightful place in the housing finance market. In order for our industry to serve the nation's members, we must use innovative new ways to bring solutions, utilizing the tried and proven concept of aggregation. This couldn't be truer than aggregating credit union loan portfolios to achieve the scale needed to access the technology and the expertise essential to achieve this objective.

Credit unions must also consistently increase origination volume to maintain the size of the

servicing portfolio. Aggregation is a certain means of maximizing the return on servicing rights. This strategy ensures the scale essential to lower servicing costs and to allow the industry to access best of breed solutions. For aggregation to succeed, the industry has to evolve its view of loan servicing and its role in three main areas:

• Service as a cornerstone for member retention
• Cross selling
• Risk management

As credit unions' real estate portfolios grow, so do associated risks. We would go as far as to say managing risk will be instrumental to the survival of credit unions. Managing risk requires access to systems and analytics. These systems and solutions are costly and only available to large-scale servicers. In this case aggregation becomes a prerequisite to access these solutions at an affordable price.

This is the executive summary to a white paper by Prime Alliance Solutions entitled “Rethinking Loan Servicing.” Read the complete paper online here.