Cornerstone latest lender to take mortgage loan servicing in-house

Cornerstone Home Lending is the latest mortgage lender to take its mortgage loan servicing in-house — a trend that’s gaining traction as lenders look to smooth ups and downs in revenue and retain past customers when they refinance or buy their next home.

Toby Wells

Houston-based Cornerstone announced Wednesday that the company has built “an elite team of servicing professionals” led by Toby Wells, and will use software provided by Black Knight Inc. to collect payments on new loan originations. Before joining Cornerstone last year, Wells spent 18 years with Specialized Loan Servicing, the last 5 years of which he served as CEO, leading a team of more than 1,400.

Cornerstone Home Lending — not to be confused with Washington, D.C.-based Cornerstone First Financial, which was recently acquired by end-to-end real estate platform Fathom Holdings — said it will also transition its existing mortgage portfolio to the company’s in-house system in the coming months.

“Fulfilling our corporate responsibility to provide a remarkable customer experience in the mortgage servicing function requires Cornerstone to take full ownership and daily control of the entire servicing process,” said Cornerstone President Adam Laird, in a statement. “Cornerstone customers will remain in the superior care of Cornerstone team members during the loan origination and closing process, and now through the entire life of their loan.”

Loan servicing involves not only collecting monthly payments from borrowers, but also helping them avoid default in tough times. Many lenders outsource servicing to companies that specialize in it, but it’s increasingly seen as a dependable source of revenue.

Because loan servicers have details about each borrower’s interest rate and loan balance, they’re well positioned to offer homeowners refinancing when opportunities arise, or help them finance a new home purchase.

The nation’s biggest mortgage lender, Rocket Cos., has grown its loan servicing business by 25 percent over the last year, and now claims to be the nation’s fifth-largest loan servicer, collecting mortgage payments from 2.6 million homeowners.

Signing Cornerstone as a client is a coup for Black Knight, the nation’s leading provider of mortgage servicing software. But Black Knight has recently been facing stiff competition from fintech software developer Sagent.

In February, mortgage servicing giant Mr. Cooper announced that it had sold the rights to its servicing platform to Sagent in exchange for a minority stake in the company. Sagent is upgrading the platform and will license it back to Mr. Cooper and other mortgage industry players as the first cloud-native servicing platform.

Sagent also has a strategic partnership with digital lending and payments provider Figure to power Figure’s mortgage servicing, and to work with Figure to use its Provenance Blockchain technology to create efficiencies in lending.

Just last week, Sagent announced a seven-year deal with Pittsburgh-based Clearview Federal Credit Union to bring its mortgage servicing business in-house. In recent months, Sagent has announced deals with Servion Mortgage and Land Home Financial Services, as well as re-upping existing clients including Freedom Mortgage Corp. and Gateway First Bank.

Providing loan servicing software to lenders continues to be Black Knight’s biggest business, accounting for nearly 57 percent of the company’s $1.475 billion in 2021 revenue.

According to Black Knight’s most recent annual report to investors, its mortgage servicing software solutions were used to collect payments on 63 percent of the 53.2 million U.S. first lien mortgages outstanding in 2021, up from 61 percent in 2020. Black Knight estimates that its software was used to collect payments on 26 percent of the 12.2 million outstanding second lien mortgages last year. All told, Black Knight estimated that it commanded 56 percent of the total mortgage loan servicing software market in 2021, up from 54 percent in 2020.

The $838.9 million in revenue generated by Black Knight’s mortgage servicing software solutions accounted for two-thirds of the $1.25 billion in revenue generated by the company’s software solutions segment in 2021. Black Knight’s loan origination software solutions generated $411.1 million.

Black Knight’s other business segment, data and analytics, generated $225.2 million in revenue last year.

In 2019, Black Knight sued client PennyMac Loan Services alleging breach of contract and appropriation of trade secrets. PennyMac filed an antitrust complaint against Black Knight alleging that Black Knight relies on anticompetitive practices to maintain its dominance in the mortgage servicing platform market. Both cases are now in arbitration, with hearings scheduled for January, 2023.

Counting loans that it buys from correspondent lenders, Pennymac is the nation’s second biggest mortgage lender, with $234 billion in 2021 loan production. Pennymac says it’s the nation’s sixth-largest loan servicer, collecting payments on $510 billion in outstanding mortgage debt from more than 2.1 million homeowners.

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Email Matt Carter