Cornerstone brings servicing in-house

Cornerstone Home Lending is bringing its mortgage servicing in-house, joining the ranks of other companies repositioning operations on this side of the business as the rate environment changes.

The company will start by handling new loans in-house and will move the rest of its portfolio over in subsequent months. Toby Wells, a former Specialized Loan Servicing CEO who joined Cornerstone as a managing director last May, is leading the transition to the new system, which will use Black Knight software.

The company is looking to increase retention by strengthening ties with borrowers through servicing, according to Cornerstone President Adam Laird.

“We want to help our loan originators preserve those customer relationships for the life of the loan, and beyond,” Laird said in an email, when asked about the catalyst for the change.

The customer retention rate has recently risen to an eight-year high, recovering markedly since plumbing new lows during the pandemic. But without a customer engagement campaign, the rate tends to be 20% lower, and retention hasn’t been quite as strong in the cash-out refinance sector, which has become more prominent as traditional rate-and-term refinances decline.
Rate-and-term refis had a 38% retention rate compared to 30% for cashouts in Black Knight’s last quarterly Mortgage Monitor report, which reflected activity during the final three months of 2021. Cashouts also had relatively lower retention rates than rate-and-term refis the previous three quarters at 27%, 37% in 3Q21; 22%, 36% in 2Q21; and 19%, 32% in 1Q21.

Cornerstone plans to provide digital self-service amenities to borrowers, allowing them to access the company’s system from a website or mobile application. They’ll be able to, for example, choose various payment options beyond the standard monthly schedule such as bi-weekly payments. The company will also enable paperless billing, autopay features, messaging, reporting on escrow activity, payoff calculators, and disaster information.

The technology will additionally allow the business to monitor escrow and tax information and include analytics aimed at maximizing efficiency in the process.

Mortgage companies are leaning more on servicing technology to compete following an extended period of low rates that favored production. Mr. Cooper, for example, recently completed the purchase of a 20% stake in servicing technology provider Sagent in return for the intellectual property rights to its platform.

Other companies that have repositioned their servicing operations recently include loanDepot, Homepoint and Ocwen. To date, their strategies have varied in line with individual needs each company has. Some have elected to bring servicing in-house or buy assets. Others have chosen to outsource and sell.

LoanDepot brought Ginnie Mae servicing in-house. Homepoint outsourced to ServiceMac and sold Ginnie Mae servicing. Ocwen expanded its reverse mortgage servicing business by acquiring the operations, assets and employees of Reverse Mortgage Solutions for roughly $24 million.