Autoagent’s Steven Pals on Why Mortgage Lenders Should Consider Direct Servicing
Steven Pals is Director of Business Development at Autoagent, the market-leading escrow tax processor with modernized, service-focused solutions that eliminate refunds and provide up-to-the-minute accurate tax data and escrow payment processing for mortgage lenders. Pals leads the growth and adoption of Autoagent’s EscrowCloud platform. For more information, visit www.autoagent.com/solutions/payer/.
Today’s mortgage lenders face significant operational challenges, including when relying on third-party processors for outsourcing services. These services, while potentially streamlining certain tasks, can also come with substantial costs and challenges related to oversight and control. Here we explore the complexities and considerations of outsourcing, especially in light of economic pressures such as the current threat of tariffs.
Outsourcing has become a common practice among mortgage lenders, primarily to manage the increasing complexity and volume of tasks associated with escrow services and payment processing. Many subservicers provide valuable expertise and infrastructure, enabling scalability for some lenders. However, this reliance on third-party processors may introduce new challenges, particularly for organizations seeking maximum transparency and agility. When lenders outsource these critical functions, they may become dependent on the third-party’s systems and processes, which can be more complex to navigate for tasks where direct oversight is crucial.
Understanding The Costs Involved
One of the primary potential issues with outsourcing is the high cost associated with these services. Third-party processors often charge substantial fees for their services, which can significantly impact the lender’s bottom line. These costs can add up quickly, especially for lenders managing large portfolios.
According to a recent industry survey conducted by Autoagent, 40% of mortgage lenders say rising operational costs represent the biggest challenges they face in managing escrow-related payments for property taxes. Additionally, 50% of lenders indicated that managing operations through subservicers presents certain complexities, highlighting opportunities for more direct engagement.
Moreover, outsourcing can sometimes limit a lender’s control over their operations. Once a lender hands over their portfolio to a third-party processor, they may experience a loss of direct oversight of the process. This potential gap can lead to inefficiencies and errors, as the third-party processor may not have the same level of commitment to the lender’s specific needs and goals. Additionally, modifying or cancelling an outsourcing agreement can be challenging, limiting future flexibility.
The dependency on third-party processors may also introduce a layer of opacity into the lender’s operations. With outsourcing, lenders may not have full visibility into the processes and systems used by the third-party processor. This can make it difficult for lenders to monitor and manage their operations effectively, raising concerns related to compliance and customer satisfaction.
While subservicers serve an important role for many lenders, given these challenges, the need for direct servicing without middlemen is increasingly important for some mortgage lenders. Direct servicing allows lenders to manage their operations internally, providing greater transparency and flexibility. By handling tasks such as escrow services and payment processing in-house, lenders can ensure that their processes align with their specific needs and goals, leading to more efficient and accurate operations. Direct servicing enables a one-to-one model tailored to each lender’s internal compliance standards, in which they gain control over how the platform operates within their own “house” rather than relying on an external vendor.
Go Direct and Adapt to Changing Market Dynamics Easier
Direct servicing also enables lenders to adapt quickly to changing market conditions. In a volatile economic environment, flexibility is crucial for maintaining profitability and operational efficiency. By managing their operations internally, lenders can respond more swiftly to changes in regulations, market trends, and customer demands, ensuring that they remain competitive and resilient.
This was echoed by 78.6% of lenders in a recent Autoagent industry survey, who rated an all-in-one platform to streamline escrow tasks as “extremely valuable.” Of those lenders benefitting from direct servicing, many (35%) point to automation tools as the biggest cost-saving measures they’ve implemented for escrow management over the past twelve months.
This approach can be especially beneficial in light of the pricing and cost threats posed by presidential tariffs. These tariffs are set to increase the cost of imported goods and materials, which can have a significant impact on the mortgage industry. By reducing reliance on expensive third-party services, lenders can better manage their expenses and mitigate the financial impact. Direct servicing allows lenders to control their costs more effectively, ensuring that they can maintain profitability even in the face of economic pressures.
Remaining competitive in today’s business climate is important for mortgage lenders, as the industry is characterized by rapid changes and intense competition. With evolving regulations, fluctuating interest rates, and shifting consumer expectations, lenders must be agile and innovative to stay ahead.
Direct servicing not only helps lenders reduce costs and maintain control but also positions them to respond swiftly to market dynamics. By leveraging technology and optimizing internal processes, lenders can enhance their service offerings, improve customer satisfaction and differentiate themselves from competitors.
(Views expressed in this article do not necessarily reflect policies of the Mortgage Bankers Association, nor do they connote an MBA endorsement of a specific company, product or service. MBA NewsLink welcomes submissions from member firms. Inquiries can be sent to Editor Michael Tucker or Editorial Manager Anneliese Mahoney.)
