The portfolio.

Author:Hewitt, Janet Reilley
Position:Portfolio. Loan servicing.

MORTGAGE SERVICERS ARE NOW SORTING THROUGH THE HEAP OF NEW LOANS IN their portfolios in the wake of the recent origination boom. Some exotic loan types--especially in the nonprime arena--caught fire during the multiyear refi-and-purchase boom and those loans now must be serviced. This batch of new nonprime loans poses some interesting challenges.

For starters, the default expectations of these loans are not well understood. On top of that, in recent times the federal government reached settlements with some nonprime servicers over allegations of predatory servicing practices. Many in the nonprime servicing arena read the terms of those settlements as a marker for what they can and cannot do. Adding still more complexity, the Sarbanes-Oxley Act spells out another new area of responsibility. The law requires that careful processing controls and security measures be in place to ensure the accuracy of financial documents. And then there are the requirements to protect private borrower financial information--a huge ongoing challenge for servicers.


Servicing is expected to produce a greater share of mortgage banking profits this year now that originations have calmed down. One company that has learned how to blend the countercyclical nature of the origination and servicing business is SunTrust Mortgage Inc., Richmond, Virginia. We profile SunTrust's successful...

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