How Mortgage Servicers Can Adapt Yet Again

One would be hard pressed to find a mortgage servicer who would not appreciate a return to simpler times. It was not so long ago that servicers' primary responsibility was to collect payments, manage escrows and pay taxes. Things today are decidedly different.

From managing loan modifications to new and complex government programs, servicers' plates are fuller now than ever. Along with everything else, the servicing organization is now required to become "data central" for a whole host of constituencies. Given the new age of transparency in the industry that's come as a result of the recent housing and banking turmoil, this may be just the tip of the iceberg in terms of the data and information that servicers will be required to provide in the future.

On the one hand, this is fortuitous, since mortgage servicing organizations have access to incredibly rich stores of both loan level and portfolio data. On the other, however, this new role presents new challenges and an inordinate amount of effort that must be expended during perhaps the most chaotic and work-laden period of these organizations' existence. How then, does the mortgage servicer satisfy so many differing requests for data, while protecting nonpublic information and controlling access to proprietary information? One way is to deploy Web-based solutions that are easy to implement, are flexible enough to meet a wide variety of data delivery needs and that can be activated literally within a matter of days.

Servicers are being asked for data, both on a bulk basis for groups of loans and on an ad-hoc basis about subsets of portfolios or even individual loans. The problem lies in figuring out how to provide these data requests without robbing an already overstressed staff of critical productivity time.

In order to satisfy the demand for data and information, the industry requires robust ad-hoc query tools. These will process the requested data, format the results in the manner requested, and present the results to a wide variety of constituents, with content determined by their needs and authorization. These are tools that are needed today, but will become even more valuable over time.

New demands for transparency will not go away once the market eventually stabilizes. In fact, it is more likely that the demand will actually increase as a result of new reporting requirements, but also because investors and internal departments, including risk management, capital markets and others will want to see more and more loan level detail on their portfolios. Much of the turmoil the industry has experienced came about because of a lack of understanding over the actual details of loans in tranches and slices of mortgage backed securities. No one wants that situation to occur again.

The industry will never be the same as before the crisis. Certainly, for example, loss mitigation will never be handled the same way again; the whole loan modification piece of the process alone has changed things irrevocably. Early intervention will likely become a permanent part of standard operating procedures and the options considered to help homeowners stay in their home will be broader than ever before.

Data will be the key to it all.

Of course, the organization can't simply open up its servicing platform to all interested parties. For that matter, all of the information isn't what different constituents need, or want. The servicer must therefore figure out some way of controlling what data can be accessed, how that access is provided and who specifically will have access.

Investors, for example, should only be able to see loans that they have an interest in, so those must be segregated investor by investor. It also becomes necessary to determine who specifically within the investor's organization should have access. Obviously, data must also be secured, given the large amount of NPI that is maintained in servicing databases.

In order to meet these requirements, some sort of ad-hoc query or business intelligence tool is called for, one that can provide very specialized reporting. In addition, there must be a viewing mechanism that provides real-time loan level views, ideally via the Web, to allow the servicer true control over security.

With such a setup, the servicer controls the access to data, giving viewers the information they need only on the specific loans that are required to meet the need. This also allows the data to be viewed in real time, on an as needed basis, without the need for constituents to call the servicing organization every time they need something. In a nutshell, this creates a highly efficient self-service transparency.

The beauty of providing controlled, Web-based access into specific elements within the servicing platform is its ease of use and implementation. The end-user need not be specifically trained in servicing processes, tools or nomenclature. On the servicer's side, there is little-to-no impact on operations, and in fact will more likely result in a boost to overall efficiency since staff will no longer have to be diverted from daily responsibilities to satisfy data and reporting requests.

The first step, therefore, is to determine who is asking for data, and whether the data request will be for summarized or bulk data. Every servicing system worth its salt will have some function for the organization to pull bulk data or maintain its own data warehouse. By examining and categorizing the requests the organization is receiving, a good deal of duplication will be revealed. This will facilitate the creation of some standardized sets of data that can be "sliced and diced" according to the constituent's interests and needs.

Next, the servicer should determine appropriate and efficient delivery methods for the various types of data requests. These fall into three main buckets: bulk data delivery, ad-hoc queries, and immediate, one-off requests for specific data on subsets of loans or individual loans. While the first delivery method is simple enough, the second two options present greater challenges.