Resulting operational stress has driven many smaller players to outsource servicing operations, says Hays.
“For community banks and credit unions it has become entirely too burdensome,” he says.
As a result, “A lot of credit unions and community banks are moving servicing over to one of the major subservicers,” says Hays. “There is a huge amount of growth and there is a lot we have to do to support that effort.”
Subservicing volume as of Sept. 30 totaled $719 billion, up 39% from a year ago, according to the Quarterly Data Report. Hays, an executive at a company that works with Lender Processing Services to provide servicing/subservicing technology has observed about a 30% growth rate.
Borrowers with good credit who work with subservicers require less of a high-touch approach than impaired credit borrowers served by third-party special servicers, driving the demand for telephony automation that has paralleled general growth in subservicing volume, Hays says. This technology can handle about 45% to 50% of all inbound calls without involving a customer service representative, he says.
“It is used extensively,” Hays says. “We provide systems and services for many of the larger or largest subservicers in industry, and we have never seen this kind of growth before.”
Call centers use the technology to automate services borrowers need handled in a certain fashion to meet regulatory requirements and in line with the increase in subservicing it also helps handle the private-labeling needed to address multiple clients’ needs, says Hays.
“The growth in subserviced clients has resulted in a lot of personalization effort on an ongoing basis for us,” he says. “We have to make sure the contact with the borrower is consistent and personalized in name of institution and that all of the verbiage matches the requirements of institutions.” A credit union, for example, may need to refer to a customer as a “member.”
Automated call services used in subservicing require voice talent, some of which Hays says he himself has provided. Clients often have preferences for the type of voice they want and the company provides it from a group of professionals in this area it works with. Hays himself has a background in radio. Some prefer male or female voices, or need recordings in different languages. English and Spanish are the most common.
Subservicing telephony technology may help automatically fulfill a borrower’s request or create a task for a call center, depending on whether agent intervention is necessary. A request related to a loan with a prepayment penalty, for example, may need to go to an agent, he says.
Phones and faxing continue to play a large role in borrower and call center agent communications, Hays says.
“It’s surprising, but faxes in this Internet age are still used very broadly,” says Hays, citing as an example payoff statements that subservicers or servicers auto-fax. “We’re faxed millions over the years and we’re not seeing a significant decline.”
There is some alternative use of technology that accommodates requests for payoff statements via the web and the return of a printable PDF, but so far it has been limited, he says. The other alternative continues to be regular mail.
Subservicers’ growing use of call center and other technology in line with increased volume will likely increase in 2014, Hays says.
Special servicers’ use of automation also has been growing when it comes to handling new rules such as those designed to give borrowers continuity of contact when it comes to servicing, although fewer services with borrowers in this area can be automated.
One of the regulations driving increase use of third-party servicing has been more relevant to special servicers in the past will become more of a subservicing concern going forward.
Originating with the national servicing settlement with a group of large servicers over mishandling of problem loans, the single point of contact directive will expand as the big Jan. 10, 2014 deadline for a host of new Consumer Financial Protection Bureau mortgage rules hits.
SPOC, or continuity of contact, will become more important for subservicers going forward when it extends to loans with shorter-term delinquencies, bringing this requirement into the A-credit subservicing realm.
Automation can help call center agents more efficiently provide continuity of contact by better informing them about the status and priority of calls they receive in line with regulatory requirements when they are unable to immediately address those calls, he says.
“You to have to route the call appropriately as failure to do so could be very painful for our clients, so that’s something we’re very mindful of,” Hays says. “Old technology was not designed for that development,” but rather simply answers calls in the order received, he notes.
Originally servicers affected by the settlement needed to provide a single point of contact for borrowers, but new regulation is allowing servicers to distribute the contact among a small group of representatives rather than a single one, Hays notes.
“SPOC began with the big 14 and was limited to loss [mitigation], but now it is being extended to 45 day delinquency level [in some cases, and is defined] a bit more broadly, such that three or four common agents can handle a defined group of loans.”
The company provides patent-pending technology that scores calls according to their importance based on a variety of different factors designed to facilitating compliance, registering details like who is on hold and who hung up.
“The Big 14, in the beginning of SPOC they just hired masses of people even though they knew it was costly under pressure of the settlement,” he says. “In the 45 day arena, we see same thing. We believe more servicers are going to right-size SPOC operations in loss mit or manage the 45-day requirement.
“Once these processes are intelligently implemented and there are workflow processes in place, it is really going to be helpful,” says Hays. “Loan counts at the major subservicers are increasing steadily.”
SPOC is just one compliance issue driving subservicing demand but it is the most prominent and forward-looking, he says.
“There are other audit-related concerns state level, from Fannie Mae, and so forth that are beginning to be burdensome for the smaller servicers, driving them to build a subserviced route,” Hays adds.
California legislation, for example, has requirements for how certain loan resolutions like modifications or short sales need to be handled.