Thinking Long Term
Servicers facing capacity limitations are now focused on hiring, training and expanding their loss mitigation team. The colossal task at hand, insiders say, makes it imperative to simultaneously keep in mind an exit strategy that benefits from a versatile workforce.
"Now the default cycles are up, so are the loss mitigation needs, lots of people need modifications, retention workouts such as a short sale or deed-in-lieu and the general consensus is that it will last another two to three years," says Steven R. Paton, SVP of loan administration at Marix Servicing LLC. "The hope is that we won't need as much loss mitigation but I think that the skill set is close enough to that of an originator that can go back into the originations world."
For example, Marix Servicing plans to steer employees with that type of background towards one of its origination companies. An exit strategy would not mean an exit out of the organization, but into a different part of the organization. "What we try to do through not only our ongoing training programs and the evolution of our technology is create an environment where the employee wants to stay with us," he says. "Probably, what is going to happen with a lot of the larger servicers is that some of these (loss mitigation) folks will move off into originations, some will move off into the title side, fraud side, and any number of other areas that the default skill set lends itself to."
Also, some of them will re-engineer themselves into a complete different avenue where their background counts.
"One thing about servicing, that has always been attractive to me is that when defaults are up, everybody kind of gravitates towards it, when defaults are down and originations are up than you need originators, title reviewers, fraud investigators, escrow analysts, customer service representatives, and other things that can be leveraged from a default skill set - so you just move into other venues within the organization," says Jim Satterwhite, executive vice president and COO of Infusion Technologies. "Mortgage loan servicing is not an industry that people tend to flow in and out of it, but move in and out of various aspects of it."
This industry dynamic indicates that mortgage professionals who have built up their market experience through the unavoidable ups and downs of the mortgage cycle are savvy and can see both the bigger picture and its specifics. "That means they can do a better job, absolutely.
"There's so many people, and I've spoken to so many in different industries, they do not talk to as many people as I think you do when you're in loan servicing and default industry and they don't stay as long, which is the case with servicing because their skill set allows people to move around, stay in the industry and stay in it for years," Mr. Satterwhite says. "For instance, I had an administrative assistant until a year ago and she had been in the industry for 36 years. You don't hear of that in other industries as much, of people having that type of tenure."
Going forward, he adds, technology will continue to be the best way to train people, document and subsidize the training, and continue to develop the employee so they become an intricate part of the organization, develop their skills and leverage it benefit from internal growth.
"It also is very important to establish sound mentoring and developmental programs so as you have invested in training you continue to invest in that employee and their future, because if you do that they're more likely to stay and the return on that investment can be many fold and you don't have to do that front-end training over and over again." Some executives have a more pragmatic approach to exit strategies.
Alex Santos, managing director and COO of Digital Risk, Maitland, Fla., says outsourcing is an efficient way to minimize cost and avoid capacity issues from slowing down the business now and creating staff issues later on.
But according to Mr. Paton it is a matter of what kind of expertise is needed for certain processes and when outsourcing makes more sense.
"For example, when it comes to short sales a servicer is not involved that much in that transaction. ... At the end of the day you're less involved compared to a modification. Realtors are closer to these transactions so they are a potential area of outsourcing because a servicer would not want to develop a lot of expertise in that field since it's all about talking to Realtors after having talked to the borrower and they are going to short-sell their house and move out. It's just a matter of properly pricing the house, which is between the Realtor and the borrower. The servicer has no control over that. It's good to have the expertise in-house but if it slows down the process and home prices start going up, you're not going to have short sales."
A decade into the future, Mr. Paton says, most probably servicers will worry about the borrowers of today who had a loan modification with a 2% rate and went on their merry way - rather than how to recycle the expertise of their workforce.
"We are creating a generation of borrowers who will have that same expectation 10 or 15 years from now. What we're doing today is going to change the behavior of borrowers in the decades to come."