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The Exchange: Sorting Out Mortgage-Servicing Rights

At BSI Financial Services, Brandon McGee is responsible for the company’s mortgage-servicing rights and portfolio acquisitions and overseeing and supporting the day-to-day management of the company’s growing servicing portfolio.

A 15-year veteran of the mortgage industry, McGee previously worked at Fannie Mae for 11 years, most recently as a Relationship Manager. Before that, he was a Senior Portfolio Manager, where he managed the performance of Fannie Mae’s largest subservicer and MSR investors to meet expectations and requirements related to servicing customer portfolios, investor reporting, delivery accuracy, and other servicing activities. McGee also held various positions in JPMorgan Chase’s mortgage division and at H&R Block Mortgage.

What are some of the top challenges facing the management of mortgage servicing rights right now?

In no particular order: uncertainty around the resolution of mod and forbearance activity, particularly on the government and VA side. How are they going to address the loans as they exit forbearance? How to address borrowers who are unable to take advantage of the deferment solution put out by other agencies. When and how will the foreclosure processes be rolled out, and how will that be allowed to proceed? So, there’s still some uncertainty around the affected borrower population long term. Other than that, I would say pre-payment risk, right? Rates have never been lower. We don’t expect them to return to pre-COVID-19 levels anytime soon, so you’re always looking at your prepayment risk, trying to price that accordingly.

BSI was in a great position to take advantage of the MSR markets at the onset of the pandemic. A lot of the buyers in the marketplace withdrew, so there was a lack of servicing liquidity. BSI had plenty of dry powder and capital, with the wherewithal to take advantage, and quickly grew to one of the top buyers in the industry with regards to MSR.

Other than that, I would say staffing is another top challenge. It’s just completely different. BSI, as we’ve grown, we’ve had to staff up, and that’s challenging in a pandemic world. It’s more competitive. We’re seeing there are no longer regional job markets, at least not like there were before. I live in Dallas, but I could easily be interviewing for a job in New York City or Florida or even Alaska. Just as an example, on our own Capital Markets team here at BSI, we have a member from Hawaii. It’s a challenge that many can look to turn into an opportunity, as we have.

I would also say technology integration, especially when we’re talking about buying MSR from sellers. It is a challenge. We’re great to live in this digital age where there’s so many solutions, but finding the right one that hits the mark can be tough. It’s something that we’ve had to solve for as we work with different vendors, as well as managing our own internal capabilities to automate as much as possible to make sure that the boarding experience for our sellers and our borrowers alike is a seamless one and creates a good experience for everybody included.

You spent more than a decade working at Fannie Mae. What are the most important lessons you took away from that section of your career?

Great question. I spent 11 years over there at Fannie Mae, and it actually felt more like five. I went into Fannie Mae in, I think it was 2009, so just after the 2008 financial crisis. The one thing that I had learned is that you’ve got to expect the unexpected, right? There’s all types of markets. My time there was bookended by the financial crisis of ‘08 on one end and then the pandemic on the other. Expect the
unexpected. Things are just going to change.

One thing that I did recognize through Fannie Mae is that they encouraged folks to stay connected with their clients, with their customers, with their colleagues, even with the borrowers in terms of looking at reviews and reading borrower sentiment articles and things of that nature. You have to be plugged in, and you have to have a finger on the pulse.

Other than that, I’d say a couple of other takeaways that I’m applying here: you can’t be everything to everyone, so it’s best to be yourself, especially when you’re BSI and you’re working with so many different seller counterparties. You can get wrapped around the axle, trying to bend over backwards for everybody. That doesn’t mean that you’re not still trying to work and be flexible as possible, but I think that it benefits everyone when you lay out clear expectations of what we can and can’t do. Then, within those confines, try to be as flexible as possible.

Beyond that, be obsessed about customer service. It’s the big things, and it’s the little things. It’s making sure that you’re calling back your customers the same day. It’s making sure that they literally feel surrounded, right? They’re at the center of everything that we’re trying to do here at BSI, and that was a big mantra over at Fannie Mae. I think it will serve us well here at BSI, and I’m looking forward to making it happen.

About Author: David Wharton

David Wharton, Managing Editor at the Five Star Institute, is a graduate of the University of Texas at Arlington, where he received his B.A. in English and minored in Journalism. Wharton has over 16 years' experience in journalism and previously worked at Thomson Reuters, a multinational mass media and information firm, as Associate Content Editor, focusing on producing media content related to tax and accounting principles and government rules and regulations for accounting professionals. Wharton has an extensive and diversified portfolio of freelance material, with published contributions in both online and print media publications. Wharton and his family currently reside in Arlington, Texas. He can be reached at David.Wharton@thefivestar.com.

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