MassHousing’s In-House Loan Servicing Keeps Loans on Track
MassHousing’s in-house loan servicing operation plays a key role in ensuring that our borrowers are successful homeowners over the long term.
Prior to 1996, MassHousing had outsourced the servicing of its loans—which includes monthly payment processing, management of escrow accounts, customer service and default management—to more than 100 third party companies. Delinquency rates were high, and MassHousing loans constituted such a small percentage of loan servicers' business that they warranted little attention or concern.
"They didn’t give the appropriate level or effort needed by our products and our customer base," said Kevin Mello, MassHousing’s Director of HomeOwnership Servicing & Operations. "We believe we do a much better job than the businesses who used to service our loans because we have a vested interest."
At the end of February 2017, MassHousing was servicing 19,444 first mortgage loans with a principal balance of more than $3.7 billion. Only 3.23% of those MassHousing first mortgage loans were delinquent. The most recent delinquency rate published by the Mortgage Bankers Association (MBA) for conventional prime fixed-rate loans, which are the best-performing segment of mortgages and the most aggressive benchmark available, was 3.18% (as of December 2016) in Massachusetts. The MBA’s statewide delinquency ratio for all loans was 4.92%, and the FHA’s delinquency ratio in Massachusetts was 10.11%
In addition, only 0.40% of homes were in foreclosure, compared to 0.89% of MBA Conventional Prime Fixed Rate loans.
"You would expect us to have higher delinquency and foreclosure rates than the MBA's conventional prime fixed-rate loans, but that’s not always the case" Mr. Mello added. "Localized, high-touch servicing has been beneficial to our borrowers in maintaining their loans and their homes."
MassHousing has maintained that high-touch, personalized service with its borrowers despite tremendous growth in our HomeOwnership portfolio. In the last 13 years alone, the portfolio has more than doubled in number of loans being serviced—from a low of 9,300 in May 2005 to more than 19,400 today—and more than quintupled in principal balance—from $700 million in 2004 to $3.8 billion today.
A number of initiatives are underway to make the Division more efficient and responsive to our borrowers. Last year, a new loan servicing system came online that allows for easier account access, online payment processing and other features. The system also allowed MassHousing to offer new products from Freddie Mac and Ginnie Mae/Federal Home Loan Bank. A new phone system is in the works that will enhance customer service and quality control. The goal of these efforts is a better experience for our borrowers, and a better chance of their long-term success.
"The relationship we have with our customers is unparalleled in the industry," Mr. Mello said. "We really have a vested interest in their well-being and in the communities where they live. And I think that’s because of the public purpose behind our work."