A Primer on Subservicing Relationships

Industry Update
July 19, 2017

Since the financial crisis of 2008, the mortgage servicing industry has gotten significantly more complicated, competitive and costly. According to the Urban Institute, the cost to service a performing loan has effectively tripled, from $59 per loan in 2008 to $181 in 2015. Servicing a nonperforming loan is five times as expensive, rising from $482 per loan to $2,386 per loan.

Post Dodd-Frank, mortgage loan servicers, holding over $10 trillion in contracts, now face heightened attention from state and federal regulators, and compliance is top of mind for every executive.

As lenders and banks continue to look for ways to reduce their leverage and risk by selling mortgage servicing rights, subservicers will play a larger role in the overall mortgage market. But what should mortgage executives look for in a subservicing partner? A forward-thinking attitude regarding new technologies? Innovative team? A focus on developing quality, long-lasting customer relationships?  Air-tight quality control and compliance, along with a sterling reputation with agency partners and regulators?

In a word, yes.

While their role in the mortgage industry is often overlooked and doesn’t always grab headlines, quality subservicers help keep delinquency rates low and ensure lenders have a secure and stable source of capital for new loans. Bad loan performance threatens liquidity more than almost any other market factor. Subservicers are also crucial players for consumers, considering they manage what is likely their largest asset, and a key cog in the overall health of the neighborhood and surrounding community.

A Primer on Subservicing RelationshipsWith that in mind, when contracts near expiration and lenders begin to look for a subservicing partner, it is important to remember that a good subservicer does more than just reduce delinquencies. Great service helps create customers for life – those who will return for a refinance or their next purchase loan. Additionally, better loan performance enhances the value of the loan on the secondary market, improving the value of the lender’s assets.

What are the most important qualities to look for in choosing a subservicing partner? While not exhaustive, here are a few items for your checklist:

Performance and culture

This much is obvious – the company must be able to successfully take care of your customers and your assets. There are a variety of specific metrics you can take advantage of to get a clear picture, including loan performance (delinquency and cure rates), third-party performance scorecards, accounting reviews, and customer service reviews.

Specifically, make sure you examine a subservicer’s record on key customer-centric data points, such as the average speed to answer an inbound call (60 seconds or less) and call abandonment rate (5% or less).

Additionally, Fannie Mae requires its servicing partners to adhere to established foreclosure time frames. The variety of foreclosure-related legal structures in each state means subservicers must be cognizant of both judicial and non-judicial requirements and maintain acceptable timelines. For instance, Fannie allows up to 300 days in Tennessee, while the judicial foreclosure process in Washington, D.C., may take up to 1,230 days to complete.

Perhaps just as critical as the bottom-line performance stats is the company’s culture, which should align with your company’s culture and vision. First and foremost, make sure the subservicer has a customer-centric model and culture that is more than just a catchy slogan or a “motivational” poster in the CEO’s office. From top to bottom, employees must be driven to help borrowers. Are they proactive or reactive to customer concerns? Note how long it takes the team to respond to an email from a borrower. Find out if they anticipate problems and delinquencies or if they find themselves scrambling to react.

The platform

Review the subservicer’s current portfolio and performance to determine if there is appropriate capacity for growth and scalability. In addition, you should plan to conduct a thorough on-site due diligence meeting. Inquire with the management team to understand what their typical client is like and what has been onboarded in the past year. Also ask how many clients have transferred out and why. Determine if they have any client concentration and, if so, what steps the subservicer is taking to mitigate that risk.

Also, ensure the subservicer can handle additional business while maintaining quality service. A good rule of thumb here is don’t try and add more than 15% to 20% to a subservicer’s portfolio at a time, and closely monitor performance.

Remember that we live in the highly regulated, increasingly complex era of Dodd-Frank/Consumer Financial Protection Bureau (CFPB), not to mention a host of strict state-based servicing rules. In many ways, servicers are the ambassadors for the industry, and if your potential subservicing partner isn’t equipped to operate in that environment, your reputation and business could be at risk. Make sure you know exactly what its policies and procedures are for handling a delinquent loan.

A Primer on Subservicing RelationshipsReview the management team to ensure that there is requisite depth and breadth of experience, with assets similar to yours. Also investigate employee tenure and experience. Focus on issues such as turnover – a key measurement. Determine if the company offers its employees any educational reimbursements or other benefits that are important to retain staff. Ask how extensively the staff is trained, particularly with maintaining compliance with CFPB rules and guidelines. Subservicing executives who have spent time “in the trenches” in loan servicing and have more than a superficial knowledge of the day-to-day effort that goes into providing top-notch customer service are critical to success as the portfolio expands.

Request references

In addition to doing your own research on-site to evaluate a subservicer, you need to make sure you obtain a second opinion. Start by finding out how the ratings agencies score the company. Check servicer ratings from trusted servicing agencies.

What’s the organization’s reputation? Ask around within the industry and find out if, for instance, the compliance team is well-regarded or if colleagues and regulators consider it to be a company that cuts corners.

What’s the company’s industry experience? Solid subservicers don’t spring up overnight; it takes time to acquire the talent and experience to navigate customer and compliance challenges. Further, you need to know if a potential partner has caught unwanted attention from a regulator. While not necessarily a deal-breaker, it’s something to make sure you know about in advance.

Technological change

Technology is rapidly changing the mortgage landscape, and your subservicing partner must be ready to do more than just cope with disruptive change; it must be prepared to embrace change and use new technology options to improve customer experience and streamline internal processes.

Borrowers using mobile banking apps expect the servicer to provide innovative tools for them to more easily pay their mortgages. At a minimum, a subservicer must have a robust and user-friendly website to ensure a positive borrower experience. Making technology adoption a part of the company’s culture will also demonstrate the desire to maximize efficiencies in the right way without sacrificing quality service. Invest in people and customer experience, not in parts of the business that don’t directly impact borrowers.

Financial checkup

Finally, be well-acquainted with the company’s financial positioning. Find out if your subservicer is an affiliated company, and if so, determine what the parent company is. If you see stress with any related companies, be warned that if that cascades down to the subservicer, there’s a good chance the quality of customer service will be negatively impacted.

All of this will take time, so be patient and thorough. A subservicing relationship is critical to any lender or investor business model. The assessment of a new partnership must be comprehensive and go beyond a Google search and a call or two. The right subservicing partner will expand and extend lending opportunities for the next generation of borrowers.

Allen Price is senior vice president of business development at RoundPoint Mortgage Servicing Corp. He can be reached at allen.price@roundpointmortgage.com.

Source: MortgageOrb



Alan Jaffa

Alan Jaffa is the chief executive officer for Safeguard, steering the company as the mortgage field services industry leader. He also serves on the board of advisors for SCG Partners, a middle-market private equity fund focused on diversifying and expanding Safeguard Properties’ business model into complimentary markets.

Alan joined Safeguard in 1995, learning the business from the ground up. He was promoted to chief operating officer in 2002, and was named CEO in May 2010. His hands-on experience has given him unique insights as a leader to innovate, improve and strengthen Safeguard’s processes to assure that the company adheres to the highest standards of quality and customer service.

Under Alan’s leadership, Safeguard has grown significantly with strategies that have included new and expanded services, technology investments that deliver higher quality and greater efficiency to clients, and strategic acquisitions. He takes a team approach to process improvement, involving staff at all levels of the organization to address issues, brainstorm solutions, and identify new and better ways to serve clients.

In 2008, Alan was recognized by Crain’s Cleveland Business in its annual “40-Under-40” profile of young leaders. He also was named a NEO Ernst & Young Entrepreneur of the Year® finalist in 2013.


Chief Operating Officer

Michael Greenbaum

Michael Greenbaum is the chief operating officer for Safeguard. Mike has been instrumental in aligning operations to become more efficient, effective, and compliant with our ever-changing industry requirements. Mike has a proven track record of excellence, partnership and collaboration at Safeguard. Under Mike’s leadership, all operational departments of Safeguard have reviewed, updated and enhanced their business processes to maximize efficiency and improve quality control.

Mike joined Safeguard in July 2010 as vice president of REO and has continued to take on additional duties and responsibilities within the organization, including the role of vice president of operations in 2013 and then COO in 2015.

Mike built his business career in supply-chain management, operations, finance and marketing. He has held senior management and executive positions with Erico, a manufacturing company in Solon, Ohio; Accel, Inc., a packaging company in Lewis Center, Ohio; and McMaster-Carr, an industrial supply company in Aurora, Ohio.

Before entering the business world, Mike served in the U.S. Army, Ordinance Branch, and specialized in supply chain management. He is a distinguished graduate of West Point (U.S. Military Academy), where he majored in quantitative economics.



Sean Reddington

Sean Reddington is the new Chief Information Officer for Safeguard Properties LLC. Sean has over 15+ years of experience in Information Services Management with a strong focus on Product and Application Management. Sean is responsible for Safeguard’s technological direction, including planning, implementation and maintaining all operational systems

Sean has a proven record of accomplishment for increasing operational efficiencies, improving customer service levels, and implementing and maintaining IT initiatives to support successful business processes.  He has provided the vision and dedicated leadership for key technologies for Fortune 100 companies, and nationally recognized consulting firms including enterprise system architecture, security, desktop and database management systems. Sean possesses strong functional and system knowledge of information security, systems and software, contracts management, budgeting, human resources and legal and related regulatory compliance.

Sean joined Safeguard Properties LLC from RenPSG Inc. which is a nationally leading Philintropic Software Platform in the Fintech space. He oversaw the organization’s technological direction including planning, implementing and maintaining the best practices that align with all corporate functions. He also provided day-to-day technology operations, enterprise security, information risk and vulnerability management, audit and compliance, security awareness and training.

Prior to RenPSG, Sean worked for DMI Consulting as a Client Success Director where he guided the delivery in a multibillion-dollar Fortune 500 enterprise client account. He was responsible for all project deliveries in terms of quality, budget and timeliness and led the team to coordinate development and definition of project scope and limitations. Sean also worked for KPMG Consulting in their Microsoft Practice and Technicolor’s Ebusiness Division where he had responsibility for application development, maintenance, and support.

Sean is a graduate of Rutgers University with a Bachelor of Arts and received his Masters in International Business from Central Michigan University. He was also a commissioned officer in the United States Air Force prior to his career in the business world.


General Counsel and Executive Vice President

Linda Erkkila, Esq.

Linda Erkkila is the general counsel and executive vice president for Safeguard and oversees the legal, human resources, training, and compliance departments. Linda’s responsibilities cover regulatory issues that impact Safeguard’s operations, risk mitigation, enterprise strategic planning, human resources and training initiatives, compliance, litigation and claims management, and mergers, acquisition and joint ventures.

Linda assures that Safeguard’s strategic initiatives align with its resources, leverage opportunities across the company, and contemplate compliance mandates. Her practice spans over 20 years, and Linda’s experience covers regulatory disclosure, corporate governance compliance, risk assessment, executive compensation, litigation management, and merger and acquisition activity. Her experience at a former Fortune 500 financial institution during the subprime crisis helped develop Linda’s pro-active approach to change management during periods of heightened regulatory scrutiny.

Linda previously served as vice president and attorney for National City Corporation, as securities and corporate governance counsel for Agilysys Inc., and as an associate at Thompson Hine LLP. She earned her JD at Cleveland-Marshall College of Law. Linda holds a degree in economics from Miami University and an MBA. In 2017, Linda was named as both a “Woman of Influence” by HousingWire and as a “Leading Lady” by MReport.


Chief Financial Officer

Joe Iafigliola

Joe Iafigliola is the Chief Financial Officer for Safeguard. Joe is responsible for the Control, Quality Assurance, Business Development, Accounting & Information Security departments, and is a Managing Director of SCG Partners, a middle-market private equity fund focused on diversifying and expanding Safeguard Properties’ business model into complimentary markets.

Joe has been in a wide variety of roles in finance, supply chain management, information systems development, and sales and marketing. His career includes senior positions with McMaster-Carr Supply Company, Newell/Rubbermaid, and Procter and Gamble.

Joe has an MBA from The Weatherhead School of Management at Case Western Reserve University, is a Certified Management Accountant (CMA), and holds a bachelor’s degree from The Ohio State University’s Honors Accounting program.


AVP, High Risk and Investor Compliance

Steve Meyer

Steve Meyer is the assistant vice president of high risk and investor compliance for Safeguard. In this role, Steve is responsible for managing our clients’ conveyance processes, Safeguard’s investor compliance team and developing our working relationships with cities and municipalities around the country. He also works directly with our clients in our many outreach efforts and he represents Safeguard at a number of industry conferences each year.

Steve joined Safeguard in 1998 as manager over the hazard claims team. He was instrumental in the development and creation of policies, procedures and operating protocol. Under Steve’s leadership, the department became one of the largest within Safeguard. In 2002, he assumed responsibility for the newly-formed high risk department, once again building its success. Steve was promoted to director over these two areas in 2007, and he was promoted to assistant vice president in 2012.

Prior to joining Safeguard, Steve spent 10 years within the insurance industry, holding a number of positions including multi-line property adjuster, branch claims supervisor, and multi-line and subrogation/litigation supervisor. Steve is a graduate of Grove City College.


AVP, Operations

Jennifer Jozity

Jennifer Jozity is the assistant vice president of operations, overseeing inspections, REO and property preservation for Safeguard. Jen ensures quality work is performed in the field and internally, to meet and exceed our clients’ expectations. Jen has demonstrated the ability to deliver consistent results in order audit and order management.  She will build upon these strengths in order to deliver this level of excellence in both REO and property preservation operations.

Jen joined Safeguard in 1997 and was promoted to director of inspections operations in 2009 and assistant vice president of inspections operations in 2012.

She graduated from Cleveland State University with a degree in business.


AVP, Finance

Jennifer Anspach

Jennifer Anspach is the assistant vice president of finance for Safeguard. She is responsible for the company’s national workforce of approximately 1,000 employees. She manages recruitment strategies, employee relations, training, personnel policies, retention, payroll and benefits programs. Additionally, Jennifer has oversight of the accounts receivable and loss functions formerly within the accounting department.

Jennifer joined the company in April 2009 as a manager of accounting and finance and a year later was promoted to director. She was named AVP of human capital in 2014. Prior to joining Safeguard, she held several management positions at OfficeMax and InkStop in both operations and finance.

Jennifer is a graduate of Youngstown State University. She was named a Crain’s Cleveland Business Archer Award finalist for HR Executive of the Year in 2017.


AVP, Application Architecture

Rick Moran

Rick Moran is the assistant vice president of application architecture for Safeguard. Rick is responsible for evolving the Safeguard IT systems. He leads the design of Safeguard’s enterprise application architecture. This includes Safeguard’s real-time integration with other systems, vendors and clients; the future upgrade roadmap for systems; and standards designed to meet availability, security, performance and goals.

Rick has been with Safeguard since 2011. During that time, he has led the system upgrades necessary to support Safeguard’s growth. In addition, Rick’s team has designed and implemented several innovative systems.

Prior to joining Safeguard, Rick was director of enterprise architecture at Revol Wireless, a privately held CDMA Wireless provider in Ohio and Indiana, and operated his own consulting firm providing services to the manufacturing, telecommunications, and energy sectors.


AVP, Technology Infrastructure and Cloud Services

Steve Machovina

Steve Machovina is the assistant vice president of technology infrastructure and cloud services for Safeguard. He is responsible for the overall management and design of Safeguard’s hybrid cloud infrastructure. He manages all technology engineering staff who support data centers, telecommunications, network, servers, storage, service monitoring, and disaster recovery.

Steve joined Safeguard in November 2013 as director of information technology operations.

Prior to joining Safeguard, Steve was vice president of information technology at Revol Wireless, a privately held wireless provider in Ohio and Indiana. He also held management positions with Northcoast PCS and Corecomm Communications, and spent nine years as a Coast Guard officer and pilot.

Steve holds a BBA in management information systems from Kent State University in Ohio and an MBA from Wayne State University in Michigan.


Assistant Vice president of Application Development

Steve Goberish

Steve Goberish, is the assistant vice president of application development for Safeguard. He is responsible for the maintenance and evolution of Safeguard’s vendor systems ensuring high-availability, security and scalability while advancing the vendor products’ capabilities and enhancing the vendor experience.

Prior to joining Safeguard, Steve was a senior technical architect and development manager at First American Title Insurance, a publicly held title insurance provider based in southern California, in addition to managing and developing applications in multiple sectors from insurance to VOIP.

Steve has a bachelor’s degree from Kent State University in Ohio.