Executive Eyes MBA Show Panels on Back-End Servicing Issues

The robo-signing fiasco only highlighted the fact that having the paperwork in order is equally critical for lenders, servicers, investors and borrowers.

Mike Wileman, president and CEO of Orion Financial Group Inc., Southlake, Texas, is one of many industry veterans who see paperwork accuracy and transparency as a powerful factor that is affecting how the industry is and ultimately will conduct business in the future.

At the MBA servicing conference in Dallas Wileman is looking forward to witnessing a deeper discussion about compliance and other back-end mortgage servicing process related issues because compliance “is not going away.”

Before heading to Dallas he attended a distressed assets conference in Florida where residential lenders and servicers were contemplating how to increase loan processing and paperwork accuracy and transparency.

He says, certain residential real estate investors now looking at purchasing opportunities in both distressed and nondistressed areas are carefully reviewing these for sale assets.

Before buying or investing in whole loans, he said, they have to make sure there are no disruptions in the paperwork trail. “You need to go through the whole pile and find out how many times the loan has been bought and sold.”

Missing loan assignments and re-assignments or inaccuracies in the title chain are red flags everyone wants to avoid. Such inaccuracies may create risk the buyer may have to deal with in the future.

In today’s marketplace mortgage asset sales are probable only if and when the paperwork is complete and all documents are in order. Buyers would simply have to change the loan title and protect it going forward. It is the only way to prevent future problems.

Wileman says investors routinely inquire whether additional work is required to fill out loan information gaps and to get the paperwork in order. “If it takes too much time and money,” they just drop the deal and refuse to buy the asset.

Clearly, if the buyer pays for what is not in order at the moment of purchase in times when sellers are trying to get rid of distressed assets they may have to deal with related problems down the line.

Similarly, sellers may see their distressed asset portfolios and need for additional reserves grow unless they ensure paperwork is in order. Otherwise, he says, they may never be able to sell the paper.

And whether they process all the paperwork in-house or through outsourcing, banks are way too busy with the high volume of servicing demand to prioritize. Currently there is no room for dilemma about what type of demand is higher since the need for loan reviewing and processing time and specialty servicing expertise are equally sought after.

He agrees, however, that while outsourcing will prevail going forward, specialty servicers will get the upper hand.

Other topics of interest at the conference include MERS and the ongoing debate about electronic information management and regulation along with servicing pricing issues especially in the commercial market.

Whether a party is buying or selling, Wileman argues, when paperwork and asset valuation problems arise, the best response is taking immediate action to ensure “the paperwork is in place and problem assets are flushed out of the books,” and watch out for what is mandated by regulators.