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Servicers’ Status for 2019? It’s Complicated

Industry Update
December 24, 2018

Source: National Mortgage News

Mortgage servicers should expect reliable profits in 2019, but origination challenges may spill over into their sector in the form of operational complexities and higher costs.

Servicing portfolio runoff could decrease and mortgage servicing rights valuations could increase in 2019 in ways that bode well for servicers, but continuing constraints on originations also could make their work more complex and expensive.

There may be more stress on subservicers’ budgets

For subservicers, an uptick in transfers next year as lenders release more servicing or consolidate could make their work more complex, and costly.

Subservicing work might be more complicated because clients that retained historically, and are starting to sell, will only need subservicers to handle their servicing in the short-term, from after origination until it is sold.

“A transfer, depending on where you sit, may or may not be good for your business,” said David Vida, executive vice president at Specialized Loan Servicing, a subsidiary of Computershare.

So can companies make money as an interim servicer?

“People need to pay you the right amount of money to board and de-board a loan. That’s where automation, technology, and a smart process make a huge difference,” said Vida. “It’s a thin-margin business. Our challenge is how to provide a strong customer experience while spending less money.”

The need to service second mortgages could grow

Another trend subservicers will have to contend with in 2019 is demand to service the growing number of home equity products lenders are expected to originate if rates and home prices keep rising.

“Next year could be the year of home equity,” said Gagan Sharma, president and CEO at BSI Financial Services. The product is more complicated for monoline servicers to handle than traditional mortgages because of the mix of short-term draws and longer-term withdrawals that may be involved.

While most servicers and subservicers are largely expecting a continuing climb in home equity business as home prices and rates rise; they tend to also agree there are a couple of risks to this forecast.

The economy may be overdue for a downturn

One common concern is that the length of the recent economic expansion suggests it is due for a reversal.

“I worry about the economy,” said Sharma.

Among developments that could weaken the market’s strong housing and loan performance, or lower rates, are global turmoil, excessive damage from natural disasters, the spread of local housing bubbles, or excessive consumer debt.

“I don’t believe the housing market will be the cause of the next downturn, but if there is ever a downturn the housing industry will definitely be impacted,” said Sharma.

Mortgage delinquency rates could bottom out

So far, however, there is little sign of any deterioration in mortgage credit at Fannie Mae, the largest secondary market buyer in the market.

“The Fannie delinquency rate is the lowest is has been in some time,” Sharma noted.

So long as no unexpected development such as a significant uptick in delinquencies occurs, next year could be a relatively good one for performing servicers with strong cost controls and technology.

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CEO

Alan Jaffa

Alan Jaffa is the Chief Executive Officer for Safeguard Properties, 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® Award finalist in 2013.

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Esq., General Counsel and EVP

Linda Erkkila

Linda Erkkila is the General Counsel and Executive Vice President for Safeguard Properties, with oversight of legal, human resources, training, and compliance. Linda’s broad scope of oversight covers regulatory issues that impact Safeguard’s operations, risk mitigation, strategic planning, human resources and training initiatives, compliance, insurance, litigation and claims management, and counsel related to 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. She has practiced law for 25 years and her experience, both as outside and in-house counsel, covers a wide range of corporate matters, including regulatory disclosure, corporate governance compliance, risk assessment, compensation and benefits, litigation management, and mergers and acquisitions.

Linda earned her JD at Cleveland-Marshall College of Law. She holds a degree in economics from Miami University and an MBA. Linda was previously named as both a “Woman of Influence” by HousingWire and as a “Leading Lady” by MReport.

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COO

Michael Greenbaum

Michael Greenbaum is the Chief Operating Officer of Safeguard Properties, where he has played a pivotal role since joining the company in July 2010. Initially brought on as Vice President of REO, Mike’s exceptional leadership and strategic vision quickly propelled him to Vice President of Operations in 2013, and ultimately to COO in 2015. Over his 14-year tenure at Safeguard, Mike has been instrumental in driving change and fostering innovation within the Property Preservation sector, consistently delivering excellence and becoming a trusted partner to clients and investors.

A distinguished graduate of the United States Military Academy at West Point, Mike earned a degree in Quantitative Economics. Following his graduation, he served in the U.S. Army’s Ordnance Branch, where he specialized in supply chain management. Before his tenure at Safeguard, Mike honed his expertise by managing global supply chains for 13 years, leveraging his military and civilian experience to lead with precision and efficacy.

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CFO

Joe Iafigliola

Joe Iafigliola is the Chief Financial Officer for Safeguard Properties. Joe is responsible for the Control, Quality Assurance, Business Development, Marketing, Accounting, and Information Security departments. At the core of his responsibilities is the drive to ensure that Safeguard’s focus remains rooted in Customer Service = Resolution. Through his executive leadership role, he actively supports SGPNOW.com, an on-demand service geared towards real estate and property management professionals as well as individual home owners in need of inspection and property preservation services. Joe is also an integral force behind Compliance Connections, a branch of Safeguard Properties that allows code enforcement professionals to report violations at properties that can then be addressed by the Safeguard vendor network. Compliance Connections also researches and shares vacant property ordinance information with Safeguard clients.

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.

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Business Development

Carrie Tackett

Business Development Safeguard Properties