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Latest report from mortgage advisory firm addresses common servicing questions and improving the borrower’s servicing experience

December 19, 2019 – GREENWOOD VILLAGE, CO – STRATMOR Group, the mortgage industry’s leading data-driven advisory firm, addresses some of the most common questions mortgage professionals have on servicing in the December issue of its monthly Insights Report.

The Insights Report features Principal Seth Sprague’s article,  “Prepayment Speeds, Escrow Balances and Diet Coke®: Tales from a Servicing Expert” where he discusses his experiences teaching MSR servicing at the School of Mortgage Banking (SOMB II) for the past 12 years. The most common questions students ask, Sprague wrote, center around servicing retention, prepayment speeds, how to determine when servicing become unprofitable, and escrows.

“The topic of whether or not to retain servicing permeates most class discussions,” says Sprague. “This decision is usually determined by a company’s overall business strategy, its cash flows and the value of the customer.”

Classroom discussion on prepayments typically focuses on their impact on originations, customer retention and earnings. “Among other lessons, students learn that the margin and volume on the origination side of the business move opposite to the mortgage servicing retained (MSR) value,” Sprague says.

Sprague teaches his students that the value of the escrows is tied to the potential earnings credit. “That highlights a major difference between banks and non-banks: the ability to earn credit on escrows. Banks have a real advantage compared to non-banks in that regard,” he notes.

Servicing profitability is often a big topic of discussion in the SOMB II class, and students learn that whether servicing become unprofitable depends on the facts and circumstances of the individual portfolio and servicing operations. “In general, delinquent servicing is a liability as the servicer does not earn its service fee income and incurs elevated expenses,” Sprague says.

Sprague notes he learns much from his students, including the fact that servicing technology is often greatly outdated. “Some of the most used servicing systems are over 30 years old,” he writes. “Companies will often focus their IT investment dollar on more consumer-facing products or services, like a loan origination system. Yet to remain profitable, servicers need to invest in optimizing the borrower experience and making information more accessible to consumers.”

One of the best sources of information on the borrower’s servicing experience is STRATMOR’s MortgageSAT Borrower Satisfaction Program. In a second article in December’s report,Can Technology Fuel Servicing Retention?” STRATMOR MortgageSAT Director Mike Seminari said the Borrower Satisfaction Program can help lenders and servicers better understand the borrower experience.

STRATMOR’s MortgageSAT Borrower Satisfaction Program measures the loan process and servicing experience of more than 130,000 borrowers annually. According to Seminari, the program has found that the way borrowers are contacted by their servicer about payments can impact the likelihood that they will be repeat customers and recommend their servicer to others. For example, he writes, “borrowers prefer contact by email rather than antiquated methods like postal mail.”

Seminari’s article also provides tips and describes ways that servicers can use technology to fuel servicing retention. “Technology can fuel servicing retention by helping servicers improve the customer experience,” Seminari writes. “That means it must help you to identity areas that are in the greatest need of improvement and give you the means to put the data into action.”


Click here to download the December 2019 edition of STRATMOR Insights Report.


About STRATMOR Group

STRATMOR Group is a leading mortgage industry advisory firm that provides a range of programs and services designed to counsel lender CEOs and senior executives. STRATMOR serves more than 250 companies annually, providing strategies that increase growth and improve profitability in sales, marketing, technology, operations and mergers and acquisitions. The company leverages comprehensive, propriety data and key insights gained through extensive experience in the mortgage industry. STRATMOR is well known for its financial models and its collaboration with the Mortgage Bankers Association in the PGR: MBA and STRATMOR Peer Group Roundtables Program. Find out more about STRATMOR on its website at