Outsourcers Keep Focus on Regulation, Process Efficiency
Efforts to adjust to new market demands and comply with a heavily regulated mortgage lending marketplace involve anything from massive layoffs to speeding up loan processing automation.
Layoffs reflect only one side of the current market shifts, says Henry Santos, a managing director at Accenture Credit Services. Everyone is closely following the mortgage servicing rights market because it is still hot, he says. Recently Citi announced it may sell up to 27% of its MSRs, and for many well-known reasons, such as the Basel III capital requirements.
“Market changes are giving birth to two types of servicers with different types of assets in their portfolios,” low-risk and higher-risk loans, he says, so right now they are contemplating what would be the right size for their business model.The second shift is that if during the crisis servicers were moving their origination personnel with borrower contact experience to the back-end to take care of delinquency issues, now they are doing the reverse.
“And all these changes involve conversations about how to right size the company to maximize efficiency through outsourcing and technology,” says Santos.
Paperless technology is solving many process weaknesses, says Sanjeev Malaney, CEO of Capsilon, starting a few years ago most executives realized the paperless technology in use so far has been very basic. Today the focus is on a more advanced version of paperless. “Right now we’re well into phase three of the paperless mortgage evolution. It will further evolve in 2014 as technology providers evaluate “its strengths and weaknesses,” he says.
Banks are looking at best ways to upgrade their technology at origination and assess borrowers’ ability to pay, lock that into the loan data and then pass the information to investors, Santos says. For example, predictive borrower behavior analytics can profile the loan and monitor it from origination to securitization using well designed algorithms.
The mortgage servicing market continues to change from the business operation perspective. Loan processing and management also continues to change.Third-party service providers are actively working to assist servicer efforts to maximize their business efficiencies.
ServiceLink’s LoanCare Servicing division recently added a new mobile portal. It offers servicers and the borrowers they serve mobile and tablet-based access to myloancare.com, ServiceLink’s loan management system.
Borrowers can use the platform “to proactively self-manage many aspects of their loan,” including balance checks, payment history, interest rate data and online payment submission, and access their account data at all times seven days a week.
Features include the ability to view loan information, make payments, manage automatic drafts, view payment history, update personal information and contact their servicer.
“Achieving transparency is a primary focus” for the industry, says Gene Ross, president of LoanCare. Earlier this year the Consumer Financial Protection Bureau reported specific problem areas within mortgage servicing, including poor payment processing and loss mitigation. “Lack of shared information and inadequate communication” with borrowers were cited as key drivers of compliance risks and servicing weaknesses.