By now, every servicer appreciates the Consumer Financial Protection Bureau's single-point-of-contact expectations and the importance of using this staffing model to manage distressed borrowers.However, in order to outperform, servicers must go beyond SPOC and develop a “case ownership” perspective that more closely links all the people involved in servicing a borrower’s loan.
To most servicers, SPOC refers simply to a communication liaison between the borrower and other groups within the servicing organization. The SPOC representative is traditionally a task manager who has little authority to make decisions. Case ownership, on the other hand, supports the SPOC within a more end-to-end approach in which everyone within the servicing organization treats each borrower as a case rather than just another isolated item that they deal with when it is their turn.
Case ownership strategies allow servicers to optimize the “Three C’s” of Servicing:” customer experience, compliance and cost. The fact that today’s servicing challenges are complex in nature, require significant contextual understanding and necessitate a great deal of integration and coordination suggest that they are much better suited for a case ownership approach than a task management approach.
Case ownership methods can be implemented in many different facets of the special servicing business that represent meaningful deviations from traditional operational approaches, notably in goal-setting, workflow design and talent selection. Prior to the housing crisis, special servicers were primarily focused on either collecting or liquidating (which was mostly foreclosing). Now a premium is being placed on the servicer’s ability undertake activities such as re-underwriting borrower credit worthiness and pulling loans out of foreclosure to evaluate a borrower for an array of government and proprietary modification programs. These should not be treated as simple transactions. These require talent with a broader perspective that can understand the specific borrower situation as opposed to how to process a nameless task. This would not only be expected of the SPOC but also of the other staff -level employees in every department (e.g. escrow, foreclosure, bankruptcy) in order to take a more holistic view of the loan and the borrower’s evolving situation.
Naturally, establishing this approach and affecting the appropriate employee behavior requires establishing resolution-focused goals and incentive structures across the platform. Further, compensation needs to hold employees accountable for actually moving loans through the pipeline, not moving through individual task queues. Shared goals also reflect the need for enhanced workflow processes that allow multiple groups to track progress and quickly make well-informed decisions. Technology improvements are making this easier for organizations with nimble, non-legacy systems with robust data environments.
Lastly, to be successful in applying case ownership, a servicer must also recruit a different kind of employee who is capable of executing on this type of approach. Broader product knowledge, advanced interpersonal skills and the ability to integrate information will all increase performance relative to staff that are simply focused on connecting borrowers to different departments across the enterprise.
The benefits of managing loans with a case ownership approach clearly impacts the customer experience, compliance and costs associated with special servicing. With case ownership, it is reasonable to expect a superior customer experience because there will be fewer hand-offs, the representative will have deeper knowledge of the nuances of the loan, faster resolutions—all resulting in stronger borrower relationships. Case ownership also helps maintain full adherence to compliance and regulatory standards due to the broader borrower perspective, integration of information and enhanced workflow, all leading to a decrease in task sequencing problems. Lastly, it may not be intuitive that hiring and training higher skilled employees and implementing extensive workflow will lower costs. At the most fundamental level, case ownership suggests there is validity to the ageless wisdom that it will cost you less if you spend the time and effort to do it right the first time. Avoiding additional process steps, delays and non-compliance all reduce costs to servicers and their clients.
The mortgage servicing industry has had to re-invent itself following the housing crisis and the corresponding regulatory response, creating challenges and opportunities. Servicers are going back to being more borrower-centric like the old 50s and 60s-style finance companies. SPOC is certainly a step in the right direction, but the changes required to truly excel are much more involved than designating a SPOC. Many of the large banks recognize how challenging it really is to make these changes, and as a result, you will continue to see more MSR and loan sales as the banks limit their exposure to distressed servicing. For the servicers that apply case ownership and optimize the Three C’s of Servicing in today’s industry, it is a new frontier of more satisfied borrowers, investors and regulators.
Andy Laing is the chief operating officer of Chicago, Ill.-based Fay Servicing, a special servicer that manages residential mortgages for banking institutions and alternative real estate investors.