I recently attended the Mortgage Bankers Association’s 2016 Annual Convention and Expo in Boston, where there was – as usual – a pretty good turnout of servicers and subservicers. During my discussions with a few of those servicers, a general theme emerged that servicing is getting caught up with the lending side of the business in terms of quality control, or QC.
But the thing is, “servicing QC” is still a nascent and developing area, particularly in terms of processes and technology, and for now, there is no single approach to it. Just as lenders have figured out exactly when, where and how to apply QC across the origination process, servicers are still learning when, where and how to apply it throughout the remainder of the loan lifecycle. This much seems apparent: In the case of servicing and subservicing, QC, by design, needs to be applied more evenly and consistently throughout the process for it to be effective.
Where things get interesting with servicing QC is how it intersects with the borrower experience. I’ve said this before, but when you get down to the crux of it, that’s mostly what the Consumer Financial Protection Bureau (CFPB) and the agencies are looking to regulate – the interactions between borrowers and servicers. But there sure are a lot of variables in how far a servicing shop goes to knock the socks off its borrowers. There are a lot of different approaches to customer service. Because of the inherent subjectivity of “good customer service,” this is where servicing QC gets kind of murky. What, exactly, does one document?
In terms of processes, I see two main areas where servicing QC becomes critically important: mortgage servicing rights (MSR) transfers and vendor oversight. The CFPB has said repeatedly that it is keeping a watchful eye on how servicers handle their MSR transfers – particularly with regard to loans that are in loss mitigation. Some servicers continue to struggle in this area, but it is mainly due to their legacy technology and a lack of good system integration. As George FitzGerald of Black Knight Financial Services points out in his feature on avoiding MSR transfer pitfalls, it would be great if the industry could adopt a more standardized approach to handling loan modifications, as this would reduce friction in the MSR transfer process.
I also see servicing QC as playing an important role in vendor oversight. That is to say, I see an important intersection between the two, and, again, it all comes down to proper system integration. For years now, the core platform providers have been developing application programming interfaces to seamlessly integrate the platforms used by the major subservicers with the systems used by their clients – whether those are banks or master servicers – so as to provide a greater level of transparency into their operations. Basically, the goal is to enable subservicers to push out high-level operational data that can be presented to their clients via a graphical dashboard. This capability has been in existence in the outsourced contact center realm for more than a decade, but many servicing shops are just getting caught up with it due to their lack of investment in core systems and technology. Another reason for the delay in adoption is that most servicers are outsourcing their QC, so they see no point in spending their money on this level of system integration. But I’m willing to bet that more of them will bring their QC in-house over time and that they will want this capability. At this point, I see no reason why a bank or master servicer shouldn’t be able to monitor its subservicer’s activities in near real time and document them for itself.
Lastly, electronic document technology is playing an increasingly important role in helping servicers achieve QC, just as it has on the origination side. Storing not just the documents, but also, more importantly, the data – including all of a borrower’s data collected on the origination side – in centralized systems is helping servicers tremendously, as they can now perform analytics, uncover trends and create loan-level reports for audits much more readily and easily. No doubt, “e” will soon prove itself to be just as much a boon on the servicing side as it is on the origination side, particularly for refinances and loan modifications. In fact, one vendor told me recently that the first “e-modification” is already on the horizon.