Stressed Servicing Sector Finds Relief in .Net Technology

James Dowell is executive vice president and chief operating officer of MortgageFlex Systems Inc., a mortgage technology innovator, headquartered in Jacksonville, Fla.

Servicing technology's longstanding, second-class status is not likely to last much longer as more agile systems arrive in the sector and serious pressure from a rising rate environment comes into play.

A conservative bent among most large servicing operations until now has prevented any major changes in the high-maintenance, 30-year-old servicing systems used by most companies. But weaknesses have become apparent in the last few years.

Just as front-end products have evolved to meet current consumer needs, back-end procedures are taking a great leap forward, powered by new, Web-based (Microsoft .Net) technology.

These new, agile servicing systems provide an array of flexible options that enable servicers to solidify their customer base with a true, customer-centric approach (built around what we call a "customer information file").

Fidelity & Trust Mortgage, Chevy Chase, Md., recently began using this Web-based technology, which appealed to them "because of its seamless integration with origination," according to Mike Wallace, F&T's manager of servicing.

The company went live this month with the MortgageFlex LoanQuest Servicing system, after adding numerous features that will provide a custom-fit for its servicing needs.

A wholly owned subsidiary of Fidelity & Trust Bank, F&T Mortgage originates, underwrites, funds and sells all its residential mortgage loans, which totaled just over $1 billion last year, through offices in North Carolina, Virginia, and Bethesda and Gaithersburg, Md.

Mr. Wallace said that previously F&T had been holding loans in portfolio and servicing them for a few months until they were sold to investors on a service-released basis. In the future, they would like to sell loans on a service-retained basis producing additional income per loan, he said, praising the system's ease of use. "It's like a Windows system which provides Web-based access from anywhere," Mr. Wallace commented.

The flexibility and range of .Net technology allows data to flow back and forth in a mortgage company, among all the systems and through a single database. Whether it is the origination system, secondary marketing, or loan servicing system, the data is integrated to work harmoniously and intuitively. This approach is particularly important when an enterprise expands to multiple locations since everyone can work with the same data.

In this "life-cycle" configuration, borrower tables are linked relationally to the loans. The servicer communicates with the borrower via telephone, fax, or e-mail channels. By integrating multiple systems, workflow is re-oriented around the customer, virtually transforming a previously segregated servicing function into a more responsive LOS model.

Flexibility and agility in servicing will be indispensable in coming years as a predicted $900 billion payment "shock" becomes reality, the result of the recent rush to untested products like interest-only, negative-amortization and adjustable-rate mortgages. Already there is a move afoot to emphasize loan modifications as a realistic way to deal with increasing delinquencies and eventual foreclosures.

How will technology handle all these "problem loans?" The answer is much better with the real-time processing inherent in .Net technology. Whereas the old, "batch processing" systems run at least a day behind, the new technology has real-time processing, which moves sequentially and logically. It means the difference between big gains or big losses, especially for large servicers engaged in huge hedging decisions. (c) 2006 Mortgage Servicing News and SourceMedia, Inc. All Rights Reserved. http://www.mortgageservicingnews.com http://www.sourcemedia.com