This is a big deal for the mortgage industry, which has $12 trillion in outstanding mortgage balances. With a $676 billion servicing portfolio (per Inside Mortgage Finance as of 4Q21), Mr. Cooper is one of America’s top servicers, and they just signed a deal with fintech software firm Sagent to power more than 3 million loans. Sagent was already a servicing software leader, with the second-most market share after Black Knight.
Mr. Cooper also has their own tech platform that’s helped them achieve borrower retention rates around 40% (per their earnings transcripts), which is about double the industry average.
As part of this deal, Mr. Cooper will sell this platform to Sagent for an equity stake in Sagent and their CEO and CFO will join the Sagent board.
Sagent will then combine the platforms to serve all Sagent clients including Mr. Cooper. This links the two firms together as fintech development partners who have the size and skill to modernize this creaky part of consumer finance.
The $2.5 trillion per year market for new mortgage originations has become a slick, mobile-first experience in the past 7-8 years. But only now with moves like this will that same experience happen in the $12 trillion servicing arena.
Why? Because servicing is WAY more complicated than originations. It’s not just about borrowers making payments. It’s also about servicers providing real-time remittance and compliance for investors and regulators during every detail of a normal loan’s life. Then investor and regulator processing gets even more complicated when borrowers struggle and need hardship help.
The Consumer Financial Protection Bureau — the top consumer finance regulator — has been very vocal about servicers having their act together in this era, famously warning servicers that “unprepared is unacceptable” when millions of COVID forbearances hit.
Great software is the key to servicer preparedness. Sagent board member Andrew Bon Salle summarized these themes like this in the press release:
“America’s mortgage servicers must be powered by nimble technology to be heroes to borrowers, stalwarts to investors and stewards of consumer protection to regulators. I believe Mr. Cooper and Sagent are leading this charge in today’s market.”
Link below to the announcement. Good fintech moment for progress in a tough-to-disrupt part of finance. Comment below or ping me with questions.