WE’RE HEARING...changing rules will likely stifle innovation in mortgage technology development in the near term.
But that doesn’t mean software engineers aren’t busy. Instead, the changing regulatory environment continues to be a necessary catalyst for technology change, according to Monica Orluk, senior product manager at Fiserv Lending Solutions.
Orluk said the regulatory emphasis on data integrity has made it increasingly important that loan origination systems communicate seamlessly with loan servicing platforms, because lenders need to ensure data accuracy from the time the loan is originated through its eventual payoff or resolution.
“That consistency is becoming more and more critical as regulators increase their audits,” she told me.
Any change in regulations or reporting requirements has an impact on the technology used to support lending and servicing of loans, she said.
“We have to focus very strongly on the regulatory changes that are coming up and determine if this particular one would will have an impact on our technology,” she said. “It’s something that we really have been challenged with for a few years now.”
The Consumer Financial Protection Bureau has recently unveiled new rules that govern both origination and servicing activity. CFPB director Richard Cordray says the new servicing rule will help make sure that borrowers in trouble have access to help from their mortgage servicer.
But it’s not just the CFPB and banking agencies that lenders have to worry about. They are also operating under heightened scrutiny of loan quality from agencies such as Fannie Mae, Freddie Mac, Ginnie Mae and private entities that purchase home loans.
“While they are all pretty similar, each agency does things a little bit differently, so the technology has to be able to adapt to that,” Orluk said.
For mortgage servicers, the quest for technology that streamlines and automates default management remains paramount. With the unemployment rate remaining stubbornly high, foreclosure workloads remain elevated. And no aspect of mortgage servicing has come under more scrutiny than the loss mitigation side of the business.
“Regulatory changes are mandating how lenders can facilitate loss mitigation efforts,” Orluk said.
Lenders are being pressured to provide more loan modification opportunities and limit the “dual tracking” of foreclosure and loan modification activities. In this heavily regulated environment, Orluk said it makes sense to have routine servicing functions and loss mitigation programs hosted on one platform.
“Data doesn’t have to go back and forth from servicing to default. It’s all together.”
Despite the criticism servicers have come under from regulators, attorneys and the media over foreclosure practices, Orluk said lenders are doing everything they can with the resources they have to counsel their customers about loss mitigation options.
But she said the legislative and regulatory pressure governing loan modification efforts may actually be backfiring by making it more cumbersome to complete loan mods.
Despite all the regulatory headwinds, she said lenders are under pressure to make more borrower services available online in a self-service environment. On the deposit side of the banking industry, mobile payments, remote deposits, online banking and bill paying are boosting the expectation among borrowers that they should have self-service options as well. They want to be able to request pay-off information, start a refi, request a loan mod or perform other functions without actually having to get on the phone and call their lender.
And the growing number of borrower facing websites can ease the burden on servicing staff, Orluk noted. Borrowers expect to be able to retrieve information and perform routine functions at 2 a.m. in their pajamas, she said.
“People expect to be able to go online and take care of anything they need to take care of. It’s nice to see we are moving into the new millennium on the lending side,” she said. “The ROI is there in the terms of savings and customer retention.”
Moreover, she said Fiserv has found that borrowers respond better to loan workout offers if they can facilitate some of the activity through a website without calling the bank to talk about their personal financial hardship.
All this is happening as lenders find themselves facing an increase in demand for home purchase lending, she said. A number of lenders saw record volumes last year, and some are not prepared to see an uptick in home purchase activity yet.
“Because the economy has been slow to recover, I don’t think everyone was prepared for it.”
Ted Cornwell has covered the mortgage markets since 1990. He is a former editor of both Mortgage Servicing News and Mortgage Technology.