In the wake of several significant regulatory developments, and with more changes looming on the horizon, it seems clear that responsive and responsible servicing professionals will need to evolve and adapt to new realities.
From the Office of the Comptroller of the Currency consent orders last April to the attorneys general settlement agreed to by the nation’s five largest loan servicers, the regulatory landscape looks very different today than it did not too long ago. And with the Consumer Financial Protection Bureau contemplating new mortgage industry requirements, the regulatory momentum shows no signs of slowing down.
Across the mortgage servicing industry, compliance is item 1A on the agenda. With new requirements comes the need to update processes and procedures, as well as upgraded technological infrastructure. Increasingly, law firms are turning to powerful new technologies and effective case management systems that use streamlined and sophisticated workflow processing functionality to minimize errors, realize new efficiencies, and provide a new level of flexibility and verifiable accountability. Upgrading systems and technologies and implementing new case management capabilities represent significant investments and it is vital for law firms to understand how and when these changes should be made.
The following is an overview of industry trends, as well as a set of general best practices that can help servicers maintain compliance, particularly as it pertains to the technology deployed to process foreclosure files.
Ironically, the best practices for implementing the latest and greatest software and hardware in the mortgage servicing industry revolve around what are essentially very “old school” notions of practical utility and intuitive logic. As authors Erik Brynjolfsson and Andrew McAfee point out in their recent book “Race Against the Machine,” the technological advances and literal and figurative quantum leaps forward in computing and processing power have created a situation where the real challenges going forward will be focused less on raw technical innovations and more on our ability to utilize those computers in productive and practical ways. In other words, it’s not so much what’s under the hood as how well you drive.
The degree to which these new technologies represent a dramatic leap forward becomes evident the first time an auditor asks to see your procedures manual. Sometimes that request comes in the pre-audit questionnaire and others during the audit itself. But in the same way that printed phonebooks are going extinct in favor of digital and online directories, the procedures manual in a three-ring binder is soon to be a thing of the past. The point of workflow processing is that you do not need a procedures manual, any more than you need an abacus when you have a calculator. The logic that used to be spelled out step by step in print is now embedded into the way the case management software works. Law firms make use of a simple topical overview or process map to illustrate the workflow process and technical architecture in place.
While it may make the auditing process less arduous, the single biggest advantage of superior workflow processing and the best new case management systems is a stunning combination of accuracy and efficiency. In an industry where millions of foreclosures are processed annually—and where even a tiny handful of mistakes can be staggeringly costly—accuracy and efficiency are invaluable.
Good systems and good software can also evolve rapidly to reflect new priorities, ensuring virtually immediate and universal implementation. This is particularly important at a time when the regulatory and legislative landscape is constantly evolving.
While the distinguishing characteristics and operational details vary from system to system, the best case management systems incorporate the same essential elements: concepts based on high standards of efficiency and precision that the best law firms have always incorporated into their work.
Flexibility is essential. The best workflow processes can be modified easily to help servicers adapt and evolve to new circumstances.
One of the exciting aspects of quality workflow processing applied to new technologies is the way in which risk mitigation and efficiency can become complementary, as the same technical architecture enhances workflow while ensuring network and data security priorities.
Timelines are important. Every step in the default servicing process should have an expected completion date and timeframe. When operators and supervisors can differentiate between items due today, tomorrow and past due, they can use that information to allocate resources appropriately.
Understand that your system will only be as efficient as your workflow process. Step-dependent processing is one important way to do that: helping to provide access and workflow optimization while limiting unnecessary exposure.
It is important to have a change management system in place to test new policies and procedures before they are put into production. A weekly review process is usually sufficient, but changes can be made faster if necessary.
In a world of uncertainty, servicers can count on one thing: sound workflow processing practices—and an effective case management system to implement said practices—are mission critical to any triumphant race.
Ron Redmer is CIO of Farmington Hills, Mich.-based NDeX, a leading provider of technology and processing services for law firms nationwide. NDeX has offices in Michigan, Texas, Indiana, Minnesota, Florida, Nevada, California, Arizona and Georgia. He can be reached at rredmer@ndexteam.com.
