When it comes to automation technology, servicers are faced with a myriad of choices between traditional, in-house software versus vendor-hosted services, or software-as-a-service delivery options.
The most important factor for consideration, however, should be regarding the integrity of the loan file data.
Servicers today must effectively communicate with a wide-range of parties and navigate increasingly complex regulations and loss mitigation programs, and to do so successfully requires that they have easy access to, and full control of, all of the loan file data in their database.
Servicing software must be capable of supporting the current (and future) landscape of government programs, investor demands, elevated default rates and borrower demand for online access to data. It should position servicing staff to successfully manage a host of transactions like irregular payments, prepayment penalties, charge-offs, deferred principal transactions, incentive payments, and the like.
Three areas where loan data integrity plays a critical role include:
1) Borrower Communication—As the economy continues to struggle through recovery, consumers are more closely monitoring their own personal finances and expect the convenience of being able to do so online. As a result, providing borrowers with easy access to account data like payment details, escrow accounts, loan balances and payment histories has become the expected industry standard in terms of service levels.
In addition to the more obvious associated cost savings (reduction of printing and mailing expenses), borrowers’ proclivity toward online communication holds additional advantages for servicers as well since it provides an immediate method of delivering items like loan statements, adjustable rate mortgage change notices and yearend statements, which helps with reporting.
2) Investor Reporting—The linkage of technology within a servicing organization is tremendously important, and the ability for servicers to easily access and work with loan file data within their servicing platform is critical to working with investors who, more and more, are demanding increased access to more detailed loan data. Servicing software must be flexible enough to provide servicers with the ability to successfully perform their responsibilities under their service agreements with most investors, be they government-sponsored or private.
3) Compliance—Unlike most loan origination regulations (which are often checked and flagged prior to closing), servicers are forced to undergo more formal reviews or audits, depending on the agency responsible for oversight.
These reviews can range from a comprehensive analysis of all technologies, processes and outputs related to the soundness of business practices to a cursory check of whether the loans are being serviced within established guidelines.
One of the keys to compliance and avoiding issues in regulatory and investor reviews hinges on a servicing system’s ability to support and facilitate accurate reporting. Servicing platforms should serve as an automated means to aid in compliance and must include reporting capabilities that easily provide the required paper trail that examiners and auditors need to verify compliance.
Data Integrity Defines Success
The rate of change within the economic and regulatory environments, paired with the evolving service-level expectations of borrowers has made mortgage loan servicing a much more complex business over the last few years. As servicers implement new technology to meet the demands of the current marketplace, they must always remember that the integrity of the loan file data is ultimately what will dictate their success.
Barry Malone is vice president, sales for Dallas-based Financial Industry Computer Systems Inc. For more information, visit www.FICS.com.