Today the government, investors and other outsiders are engaged in setting the standards and establishing the minimum requirements for service performance.
The government-sponsored enterprises and other regulatory bodies have now started directing servicers and establishing benchmarks for operational metrics, such as average speed of answer, contact frequency, vendor management, timeline management, abandonment rate, timing of payment application and a large assortment of other specific performance requirements.
Is the bar set so low that investors must dictate to servicers what the minimums are and how to manage the very basic elements of our business?
Before the housing crisis in 2008, the guidance was fairly vague and was tied to words and phrases, such as reasonable, commercially viable and industry standards. Clearly, the industry standards were not adequate.
Servicers now have the opportunity to redefine the standards and reinvent how servicing is delivered.
Most mainstream servicers are established, use old technology and have focused on addressing the issues borne out of the housing crisis. Newcomers in the industry typically do not have the perceived scale and/or long-established track record to provide the level of comfort most clients seek.
The result is that the new entrants and/or growing companies are excluded from the client decision-making process when in reality they might offer the best servicing solutions.
The subservicer relationship needs to become more partner-based instead of purely just a vendor solution. In addition, the oversight component an asset owner needs to have in place must be more robust to comply with the over-arching requirements that many regulatory agencies and GSE’s now require.
The bar can be raised in both the areas of relationship management and oversight capabilities. Servicers should provide asset owners with turn-key options to manage and gain transparency into everything the servicer does. Some asset owners may want transaction-level involvement and oversight whereas others may want data or to engage a third party to review servicer performance. Each of these options should be available.
Managing borrowers effectively is very complex and compliance and investor requirements are layered by Consumer Finance Protection Bureau regulations. This includes items such as specific timeline requirements in managing lender-placed insurance, foreclosure and ARM adjustments.
At the same time, a servicer should consider and be able to implement any requirements an individual asset owner may have regarding customer contact, cross-sell, escalation, loss mitigation programs, etc.
Having a robust discovery process to capture owner requirements and also having the technology to accommodate the cross section of these specific needs against GSE requirements and any other regulatory body requirements is paramount for success.
With the technology that is available today, a servicer should be able to quickly and cost-effectively customize the following, among other factors:
- Client relationship structure
- Loan boarding and welcome process
- Cash management and payment options
- Reporting/data management and extraction
- Customer contact strategies
- IVR scripting
- Decision oversight
- Vendor choice and integration
- Escalation
- Loss mitigation
- Partner/servicer oversight and surveillance
During the past few years, our industry has been stuck trying to react to a massive problem and the legacy of the old way of managing relationships and loans. Very few servicers have been able to innovate and demonstrate new ways to raise the bar regarding how the business is managed. We have seen large servicers get bigger and one has to assume they are just focusing on absorbing massive amounts of loans.
Future servicers are aggressively looking to improve their solutions, deliver better results and ensure compliance all while inventing better ways to service consumers and their loans.
In the end, as an industry, we should not require regulatory bodies or an investor to guide us on how to raise the bar; servicers should be the driving force behind industry standards.
Dave Vida is president, correspondent lending and servicing, LenderLive Network.
