Current and expected regulatory compliance requirements and loss mitigation challenges are pressing servicers to address shortages in well-trained, experienced staff.
Supporters say mortgage servicing standards will help increase workout efficiency. But there is a catch.
"It goes back to the issue of training and it's very difficult to train people," says Rebecca Walzak, CEO and president of Walzak Consulting.
Compliance demands banks change loan processing often and fast. They may have to change everything within 30 days, which in turn demands technology systems that can be easily updated to support those changes and the staff that has to execute the work. "Training is critical. One of the issues that came out of the whole modification process is that servicers just didn't have enough people that were educated in modifications to really take on the volumes of calls and loan processing that they got."
Since capacity issues are expected to prevail at least in the short term, advanced technologies can help measure a firm's ability to process defaults and modifications or provide other loss mitigation solutions. Technology helps loan processors understand their job, provides compliance related guidance.
It monitors the mortgage servicing process, staff performance and the efficiency of vendors who act as third-party service providers. Such automated reports bring invaluable insights servicing managers can use to increase servicing efficiency.
More drastic changes seem unavoidable. "Hopefully it will be more the change toward a kind of standard approach in measurements and process, rather than just rules and regulations," Walzak says.
Better mortgage servicing standards are bound to improve the efficiency of ongoing efforts to regulate the industry. The challenge appears to be in creating the right structure of operations.
Until now the focus has been on improving the industry through more regulation, says vice president of bankruptcy operations for Prommis Solutions, Tina Jones, but these attempts to serve the homeowner at full capacity while pushing for new regulation changes way too often were counterproductive. "We never caught up with ourselves and servicers just kept these loans in the market spinning."
Frequent changes in regulation and the need to ensure full compliance month-over-month is affecting the mortgage servicing process.
While the core, the fundamentals around modifications, short sales, or deed-in-lieu have not really changed, Ravi Ramanathan, CEO of DecisionReady, says servicers have to be prepared to change and update their process almost every day. It becomes even more difficult when the servicing shop has relative experience. Executives have to make choices that seem simple. Should the servicer make three phone calls a month or five phone calls a month? Should face-to-face interviews be scheduled in the second month? How to proceed if the property is vacated? Today the rules and regulations are driving the process details.
If the servicers position themselves to continue servicing 101, default servicing 101 and the overall training of their associates, and implement quality control measures, "they are in good shape."
When the auditors review servicing processes, "they want to know if you were compliant last month based on last month's regulations," he said.
