LoanDepot brings Ginnie Mae servicing in-house

LoanDepot will cease outsourcing the servicing of loans in Ginnie Mae securitizations and will manage the process internally, the company said in an announcement

The company plans to hire an unspecified number of people in servicing as a result of the shift, with a particular focus on recruiting people for “customer-facing” positions.

News of the change followed the company’s earlier receipt of the government agency’s approval. It also is in line with loanDepot’s earlier decision to start retaining the servicing of loans sold to two government-sponsored enterprises.

“We’re relying less on third-party subservicing partners, which streamlines the process and allows us to work directly with customers,” said Dan Binowitz, loanDepot’s executive vice president of servicing and capital markets operations, in a press release.

CEO Anthony Hsieh had signaled earlier that the company was working to scale back outsourcing in this area, noting in a recent earnings call that loanDepot would be “relying relatively less on third-party subservicing partners” as part of efforts to keep improving retention through more direct contact with customers. The preliminary estimate for the recapture rate of refinances processed through the company’s consumer-direct channel was 71% during the 12 months ended Sept. 30 2021, up from 61% a year earlier, he noted.

The company’s move toward hands-on involvement in Ginnie servicing is in contrast to a publicly-traded competitor that’s distancing itself from it. HomePoint recently confirmed plans to exit Ginnie Mae servicing after selling off some of its Ginnie MSR portfolio to repay debt.

The servicing of loans guaranteed by other government agencies and bundled into Ginnie-insured securitizations generally has fewer players than the GSE market, but offers higher compensation for the relatively more complex and highly regulated work involved.

Subservicers, which can spread the expense of operations out over larger portfolios, can be a more cost-effective option and also often have specialized retention units, but mortgage companies have to be willing to cede some control of operations and potentially be equipped to manage multiple counterparties if they outsource.

Both Ginnie and the Office of the Comptroller of the Currency keep a particularly close eye on subservicing risk concentrations, so mortgage companies tend to work with multiple business partners in this area as a result, as Hsieh’s comments suggest loanDepot has.

The company’s announcement came the same day Ginnie’s first permanent president in several years was sworn in, and it’s possible that having more stable leadership in place could spur more companies to seek approvals from the government agency.