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Mortgage servicers and subservicers are responsible for processing servicing transactions for thousands, if not millions, of loans daily. As LoanLogics VP of Loan Servicing Consulting, helping lenders navigate MERS compliance, I am already starting to see and hear firsthand how the pandemic is impacting this segment of the industry. Business continuity, portfolio management and borrower stability are at the forefront of those challenges. To come out on the other side of the pandemic stronger, servicers will need to consider and even reconsider how each are handled.
Business Continuity
Servicers typically employ hundreds of people to perform the day to day tasks of mortgage servicing. It’s not unusual for companies to have facilities in more than one location and business units have been communicating remotely on a routine basis with no issues.
However, remotely managing significant numbers of individuals though this crisis certainly has presented communication and motivational challenges.
Long-term solutions might see a more wide-spread utilization of messaging apps like Slack or Microsoft Teams to provide easier and more immediate responses and facilitate group conversations between managers and employees. LoanLogics is already driving more use of video conferencing services both internally and externally with clients and partners.
For hardware, it’s common for certain types of business roles (i.e. executives, sales managers) to have laptop computers and docking stations since they may be frequently out of the office on business travel and need to stay connected. This is not the case for the typical servicing staff member who traditionally performs his or her tasks at a LAN connected desktop machine. As the pandemic ripped through the industry I suspect some companies may even have allowed stay-at-home employees to access corporate networks through an individual’s personal home computer, thus creating a real security threat when working with sensitive borrower information.
Post-pandemic it may be more effective to migrate to mobile computing solutions and transition all users to laptops. This could also enhance in-office security by allowing the asset to be locked in a cabinet or drawer instead of sitting out on a desk after hours.
When employees can return to the office, what configurations will be necessary to ensure their continued safety and health?
Prior to the pandemic, a floor at a servicer’s building would be filled with rows and rows of cubicles; sometimes, even bull pens or pods with multiple users sharing the same space. That is likely to change post-pandemic with floor plans rearranged to allow greater social distancing between employees.
Portfolio Management
Mortgage servicing involves numerous life of loan transactions, with many, if not most, involving manual processing. Servicing has typically been hesitant to expend the capital to automate such functions as:
- The verification of loan data at new loan setup
- Payoff and Lien Release processing
- MERS Transactions
For years, automating these processes and moving more aggressively to eMortgages have been discussed. This crisis drives home the need for the mortgage industry to finally put forth a concerted effort for eMortgage adoption. Not only do we find benefit in the origination of new loans, but we also find benefits to aid in the automation of many servicing tasks.
With eMortgage data we can eliminate much of the data entry required for these manual processes. Working with the MBA and the National Association of County Recorders to push for greater adoption of eRecording can also help eliminate the paper and its accompanying manual data entry for assignment & lien release processing
It’s no longer a matter of “We can’t afford to do that”, it’s now “We can’t afford NOT to do that”.
Borrower Stability
Obviously one servicing area that has been dramatically impacted by the pandemic is default management. Data from the MBA continues to show default and forbearance rates at levels we never imagined at the start of 2020.
Unfortunately, there’s no solution the mortgage industry by itself can do to change borrowers’ financial circumstances. We can only prepare for the influx of forbearance requests, modifications, and, even more unfortunately, eventual foreclosure activity.
This means maintaining a close eye on changing regulations and regulatory requirements and possibly increasing staff to handle escalating volumes of borrower inquiries, the counseling required to discuss available options or programs, and processing the accompanying documents and forms.
As the forbearance periods end in the next few months, those borrowers who have been able to return to some form of financial normalcy may require loan modifications.
Loan modification agreements for loss mitigation, while not rare, have not been all that common. One company I work with processed less than 50 in 2019. They’ve already exceeded that number just since the beginning of this year.
When modifying MERS loans, servicers need to recognize the special characteristics the agreements for these loans must have. I shared my tips for staying MERS compliant with loan modifications in a recent blog post.
Should there be a next wave of the pandemic, as some scientific experts predict, or some other unknown catastrophic event, mortgage servicers need to focus on long-term solutions that better prepare them for these challenges and obstacles. Awareness, careful planning and the right strategic partners are the first step.
For more information on LoanLogics servicing solutions for onboarding, MSR acquisition and MERS compliance solutions visit our website.
I recently shared this insight with The Mortgage Collaborative in a webinar focused on impacts of the pandemic on the industry. An on demand version of that webinar can be found here.
