MBA study finds drop in servicing costsMortgagePress.comMortgage servicing costs
With fewer loan set-ups and payoffs compared with the previous
two years, mortgage servicing costs decreased and servicing
productivity improved in 2004, according to the results of the 2005
Cost of Servicing Study conducted by the Mortgage Bankers
"Now in its seventh year of publication, this detailed
operations study is a collaborative effort between MBA and its
membership," said Marina Walsh, MBA's director of industry
analysisresearch department. "Thanks to this collaboration, study
participation levels have improved over the years. In the 2005
study, participating companies represented approximately 57 percent
of the total U.S. servicing market."
Study highlights include the following:
†Weighted average direct servicing costs (including
foreclosure and REO non-reimbursed expense) dropped to $80 per loan
in 2004 from $91 per loan in 2003. Loan servicing productivity
improved to 1,188 loans serviced per servicing employee in 2004
from 1,043 loans serviced per servicing employee in 2003.
†The primary line-item drivers of the cost decreases
included temporary labor costs (dropped 58 percent); permanent
labor expense (dropped 12 percent); telephone, postal and supply
charges (down 21 percent); and non-reimbursed foreclosure and REO
losses (down 32 percent). The functional areas showing the most
improvement were post-payoff processing, cashiering, escrow
administration and defaultareas that tend to benefit most from
fewer setups and payoffs or lower delinquencies.
†Indirect costs and losses also fell in 2004 and contributed
to a healthier financial bottom line for servicing. Interest
expense paid on behalf of borrowers who prepay during the month
dropped 56 percent to $34 per loan in 2004 from $78 per loan in
2003, as prepayments dropped. Mortgage servicing right amortization
and write-downs (net of hedging gains) averaged $397 per loan
compared to a high of $511 per loan in 2003.
†While per-loan servicing revenues remained relatively
constant, the improvements in direct and indirect costs ultimately
resulted in a turnaround for net servicing financial income. Unlike
the 2001-2003 period, in which net servicing losses averaged
between $59-$148 per loan, servicers were closer to breaking even
in 2004, with average losses of $3 per loan.
In 2005, MBA also initiated a separate sub-prime analysis to
track sub-prime company servicing income, expense, and operational
practices. This sub-prime servicing study represented an additional
13 percent of the total United States servicing market in 2004.
For more information, visit www.mortgagebankers.org.