NAFCU Services Blog

Sep 27, 2023
Categories: Mortgage Servicing

How to Begin the Search for a Mortgage Subservicer on the Right Foot

By David Allison, Senior Vice President - Dovenmuehle

If you are in the credit union industry, you understand the importance of providing top-notch services to your members. One crucial aspect of your operations is mortgage loan servicing. It is a vital component of your service offerings, and choosing the right subservicer can significantly impact your credit union’s reputation and success.

We have all heard the saying, “Choose your partners wisely,” and this rings especially true when it comes to selecting a mortgage subservicer. These partners work as an extension of your credit union, directly interacting with your members and managing critical financial information. In essence, they become an integral part of your operation, and any missteps on their part can have costly consequences.

Before diving into the specifics of choosing a subservicer, it is important to grasp their significance. Subservicers are considered Tier 1 or high-risk vendors because they handle sensitive information, manage payments and directly interact with your members. How they operate can impact your credit union’s reputation, for better or worse, and any lapses in their performance can lead to additional operational or financial risks. Moreover, with the increasing threat of cybercrime, ensuring your subservicer’s commitment to data security is paramount. Thus, credit unions should be prepared to evaluate and monitor their subservicer as they would any other Tier 1 vendor as part of an overall vendor management program.

When considering a subservicer, it is essential to define your objectives. Ask yourself why you need subservicing. Is it to enhance performance, reduce costs, provide better online services to members, support growth plans or a combination of these factors? Many credit unions operate under the assumption that volume dictates the need to engage a subservicer, but there are a multitude of factors beyond portfolio size that can drive this decision. Better understanding your “why” will guide your search for a partner that aligns with your credit union’s goals rather than one that merely touts its capabilities.

Once you’ve established these objectives, it is time to kick off the RFP process. Our free white paper, How to Vet Subservicers (and Find the Right Fit), delves deeper into key considerations credit unions should include in their RFP process when evaluating prospective subservicing partners. However, elements such as culture and proactiveness can be difficult to quantify through an RFP. As such, credit unions should anticipate conducting on-site due diligence beyond the RFP to ensure the subservicer is the right fit across all dimensions.

In the competitive landscape of credit unions, selecting the right subservicer is crucial. They should seamlessly integrate with your team, provide transparent interactions with your members and actively contribute to your growth.

Your credit union’s reputation is at stake when it comes to subservicing, so it is essential to partner with the best. Remember, your subservicer should be more than just a vendor – they should be a trusted confidant, supporting you in good times and bad. By beginning your subservicer search with the appropriate mindset and expectations, you can confidently choose a partner that enhances your credit union’s success.

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