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Differences Still Exist
Even with the collaboration and the desire to follow best practices to stay under the radar of regulators, there are still important differences among servicers, experts say.
"The industry is always trying to differentiate itself on service," Wippler said. "Some have better systems; some have better people." Either could make one servicer more responsive, quicker to complete transactions, or have fewer errors than a competitor.
Some servicers employ different technologies in order to be more responsive. For example, IndiSoft offers RxOffice a Software-as-a-Service (SaaS) workflow solution designed to provide complete transparency to all participants in the mortgage process. RxOffice features case management, document management, and workflow features. According to the company, RxOffice's open architecture enables stakeholders to determine any bottlenecks in the process as well as to provide various levels of access to different information. The solution, used in other industries as well, also has a compliance component designed for the mortgage industry.
While some servicers rely on technology systems such as RxOffice, others do not. Furthermore, even different users of the same technology may be more or less efficient than their competitors due to personnel or internal policies and procedures.
Some servicers will likely opt for technologies like Black Knight Financial Services' VeraStrat Scores, which was first announced in early March. VeraStrat Scores is a loan-level indicator of borrower risk and historical payment pattern. Servicers can use this solution to create borrower contact strategies designed to help the servicer in complying with various guidelines by identifying and contacting the highest-risk borrowers early.
"Servicers are required to follow GSE stipulations for contacting delinquent borrowers," said Mark Milner, director of Portfolio Analytics for the data & analytics division of Black Knight Financial (formerly the LPS data & analytics division), in a prepared statement. "VeraStrat Scores help servicers in complying with these requirements by identifying high-risk loans for early borrower contact. To further increase efficiency, each month servicers receive average-payment-day information, which helps them timely contact delinquent borrowers."
VeraStrat Scores can be delivered directly to the client or accessed through MSP, Black Knight's mortgage and consumer loan servicing platform.
Other servicers use still other technologies, work flow processes, management or personnel that differentiate them from their competitors, according to industry participants.
"It's a constantly evolving business," Waldron said. "Servicers have been incredibly innovative. They will continue to differentiate themselves. Servicers have put additional technology in place to help with the oversight and to make themselves more efficient. The business has been incredibly labor intensive the last couple of years. The additional technology makes complying more efficient and makes the customer experience better. There are all sorts of things today that didn't exist a few years ago."
Waldron expects large financial institutions to continue to shed portions of their servicing businesses, with non-bank servicers and sub-servicers picking up larger portions of the market.
Picking a Servicer
To select the best servicer, Wippler recommends lenders audit servicer files to inspect the number of errors and how those errors are resolved. The servicer's organization of technology systems and the personnel will help differentiate it from its competitors.
Waldron recommends lenders look at various levels of customer service the servicing firms offer as well as process workflows, compliance culture, and product specialties. The servicer's compliance practices should be strong enough that the lender doesn't need to devote more of its own resources to compliance. The servicer should also offer different approaches to help borrowers stay current with loans.
Internal compliance enforcement and training, along with technology, help differentiate one servicer from another, according to Dahiwadkar.
Looking Ahead
Though he predicts the status quo will continue for some time, Wippler expects in a few years regulations will be relaxed a little, new servicers will enter the market, and servicers will again look much less alike than they do today.
"The industry is still licking its wounds," Wippler said. "There will be a steady increase in the business, and sometime there will be another bubble that will start driving the servicing business, though I don't think the mortgage market will ever get to the level it was before the [Dodd-Frank and similar] regulations."
