The mortgage market has changed hugely since the seismic shocks of 2007/8 and it is not just lenders and borrowers who are experiencing a very different playing field from that which existed before the crash. Consider the plight of Third Party Mortgage Administrators (TPAs) who between 2000 and 2006 gorged themselves on a regular supply of new lenders coming to market, particularly in the sub-prime or specialist lending space.
These lenders had no interest in building expensive infrastructure to service the loans they created, all their energy went into product distribution and as they were more than likely to sell or securitise their assets, an outsourced servicing arrangement worked perfectly for them.
Now, almost without exception, these lenders have disappeared. Their unfunded warehouse assets have been sold and the books are slowly and inexorably running off. A lot of the assets were purchased by private equity houses or hedge funds, some of whom left the assets where they were but many took them in house for more intensive special servicing. With the trade in assets slowing to a trickle, no new lenders coming to market and the big banks yet to unbundle – the future for TPAs does not look particularly rosy.
Whilst the whole sector is probably at its lowest ebb for some time there are a couple of servicers managing to enhance their reputation even as others struggle to survive – but the overall picture is far from vibrant.
At Rockstead, our work on portfolio audits and due diligence means that we are uniquely placed to know which servicers are performing well and which ones are merely going through the motions in the hope that the market will pick up again sometime soon. We are experienced in carrying out servicer audits both for asset owners and those looking for a home for a potential purchase and can make recommendations on the best fit for a particular asset class or service requirement.
Servicers are unlikely to come through the current downturn completely unscathed but the more energetic and creative will survive and it would be good to know in advance just who is up to the mark and who is not.