In today’s multifaceted lending environment, it is necessary for lenders to utilize a sophisticated loan servicing system that can support multiple business channels, create operational efficiencies and adapt to ever-changing industry rules and regulations. Such solutions simplify operations across the board and enhance the customer experience.
When choosing a loan servicing system, financial institutions should compare how each solution supports the most important components of servicing technology: comprehensive capabilities and flexibility.
A Comprehensive Software Solution
Servicers no longer work in a silo. Servicers are progressively doing more to assist in default management, managing government loan modifications and responding to the increasing demands of investors. The servicing software solution must be able to provide a broad range of advanced functionality to meet these expanded responsibilities.
The most comprehensive software solutions possess the ability to perform smoothly from the point of manual or automatic loan boarding through the payoff of the loan. This includes payment processing, daily cash balancing, remittance and reporting to investors, default management, loan modification and consumer online banking, all while being systematically updated for regulatory compliance in each of these areas.
Ideally, a servicing platform will also integrate seamlessly with the loan origination software, eliminating the need to manually re-enter data and ensuring the integrity of all loan information. A strong integration also provides an efficient means of retrieving required origination data when selling loans that are servicing retained.
It would also be advantageous for servicers to seek a technology platform with broad reporting capabilities, including electronic storage and retrieval, as this would not only provide an immediate method of delivering the many statements, notices and other important information to the borrower, but also provide the reports and required paper trail needed in order to meet applicable regulatory requirements.
Flexible to Handle Current Lending Environment
Servicing software has to be more than merely capable of meeting the existing landscape of government programs, investor demands and elevated default rates. Servicers would benefit from seeking solutions that continually evolve to address shifting industry trends before they become an issue.
By selecting a flexible technology infrastructure that can absorb changes to business processes, investor requirements or regulatory changes, servicers are likely to experience both time savings and increased business efficiency. A system that provides the servicer the tools to comply with many of the regulatory requirements and make changes to internal business practices allows them to drive their own time line for adaption to any changes.
“Our value to our clients is the ability to provide custom loan servicing,” Dave Vida, president of loan servicing for Glendale, Colo.-based LenderLive explained. “Without our existing servicing technology, I wouldn’t be able to promise the things I promise my clients. Our servicing software enables us to use loan data to quickly provide customized services that we couldn’t otherwise support.”
Flexibility also is a necessity when meeting the requirements of a rapidly changing regulatory environment. In January, a large number of new compliance regulations implemented by the Consumer Financial Protection Bureau will go into effect, many of which have implications for servicing departments.
Servicers will need their technology to support new communication guidelines that require a lender to inform the borrower of their loss mitigation options to retain their home, such as the Home Affordable Refinance Program or the Home Affordable Modification Program. The CFPB will also require servicers to track and retain all borrower communications, a requirement that would be easily fulfilled if utilizing a technology platform with automated data and document storage and broad reporting capabilities.
Technology is key in terms of loan servicing. If servicers seek a software platform that supports a comprehensive approach to managing loans, and flexible services to meet changing needs, they will be in a position to prosper heading into 2014.
Susan Graham is president and COO of Financial Industry Computer Systems Inc., a mortgage technology specialist that provides mortgage loan origination, residential mortgage servicing and commercial mortgage servicing technology to mortgage lenders, midsized banks and credit unions.