When Servicing Loans, Keep the Focus on the Borrower Experience | Wolters Kluwer
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  • When Servicing Loans, Keep the Focus on the Borrower Experience

    by Chris Zimmerman, Product Manager, Wolters Kluwer

    Published June 12, 2018

    It’s clear from the Mortgage Bankers Association’s recent Servicing conference that the industry is continuing to place laser-like focus on improving and controlling the borrower experience when servicing loans. Great strides have been made towards this end, but it’s a mindset that needs to be at the core of every decision point along the way.

    Every decision should start with the question, “How does this impact the borrower experience?”  From there, some of the questions you should ask yourself include:

    • Where are my communication touch points with a borrower? 
    • How do I better control the borrower experience? 
    • Are my borrower communications consistent and compliant?   
    • Do I have controls in place over borrower communication templates?  
    • How flexible and scalable is my technology when defaults increase, portfolio sizes grow, or new regulatory requirements need to be implemented?
    • How do I prevent borrower complaints?
    • How do I make the loss-mitigation process more efficient?

    Customer Communications: The Core of the Customer Experience

    A large part of the focus on the borrower experience starts and ends with customer communications. It’s important that servicers have consistent and compliant borrower communications, and that they identify borrower touch points.  Servicers want cleaner, more consistent and borrower-friendly letters, while also ensuring they are compliant.

    In addition to monitoring for regulatory changes, servicers have to analyze regulatory, procedural and product changes and operationalize them within systems, processes, training and documents.  All of these operational components place a strain on resources and increase costs. Letters that go hand in hand with a process need to be delivered in a standard, uniform, and compliant manner. From a document perspective, the internal process to incorporate changes is often not efficient or timely.  

    Forward-looking servicers are seeking solutions that are flexible and allow them to address and comply with frequently changing regulatory requirements seamlessly and proactively. Technology that can be used to create, manage, test and deploy documents improve servicer efficiencies.

    Regulatory Requirements and Implementation Timelines

    Regulatory and investor loss mitigation program changes can often have short implementation timelines and place strain on resources to meet mandatory effective dates.  When notifications are issued, servicers begin the time- and resource-consumptive task of interpreting them and implementing or changing processes as needed.  Success in this arena requires staying on top of federal, investor/insurer, and state compliance requirements.

    Change Happens Fast: Be Positioned For Rapid Response

    In 2017 alone, we saw Fannie Mae and Freddie Mac issue the new Flex Modification program, several new disaster relief programs, and the release of the Veterans Affairs Affordable Modification program.  On February 22, 2018, the FHA announced a new loss mitigation program: the Disaster Standalone Partial Claim. This mandatory program requires new documents and procedures. Fewer than 70 days were provided to implement the program.  Similarly, on March 7, 2018 the USDA announced via email, that Chapter 18, HB-1-3555 will be updated with a publication and effective date of May 1, 2018. Servicers have less than two months to review and implement 67 pages of new loss mitigation requirements, including new procedures and documents. And that assumes that the text doesn’t change further when it is officially published on May 1, 2018.

    With three major hurricanes and wildfires in 2017, disaster relief programs were a key touch point with borrowers.  Government agencies and investors were quick to act, implementing improved disaster relief options for impacted borrowers. However, there are always opportunities to become more proactive to educate borrowers in advance of a natural disaster. By leveraging data, servicers can improve the borrower experience through communications that educate and help borrowers prepare— prior to being impacted by one of these life-changing events.  By thinking outside the box and being proactive, servicers can become a champion for the borrower, which in turn can only help build trust and increase customer satisfaction.

    Eliminate Paper From The Workflow and Streamline Loss Mitigation

    As it pertains to consistency in communications for loss mitigation, the ability to make loan modification programs less paper-intensive and clearer is an area that improves the borrower experience. With the sunset of the Home Affordable Modification Program (HAMP) and implementation of the Fannie/Freddie Flex Modification program, we have seen a positive shift in that direction.

    Fannie Mae combined the features of the Fannie Mae Home Affordable Modification Program (HAMP), Standard Modification, and Streamlined Modification into the Fannie Mae Flex Modification program.   The goal was to offer servicers an easier, flexible way of helping more borrowers qualify for a loan modification in a changing housing environment.  HAMP has allowed for a more streamlined and synchronized approach for GSE loan modification, with fewer documents required to complete the application process.

    While the implementation of the Flex Modification program was well received by the industry, there’s still a need for a more standard and streamlined approach to loss mitigation programs outside of the GSE efforts.  FHA servicing requirements are still challenging for servicers to execute.  The requirements are complex and labor-intensive for servicers and borrowers alike. A similar collaborative approach to the implementation of the Flex Modification program would be a significant step towards improving the borrower experience through increased home retention for FHA borrowers.

    Maintaining controlled, clear, consistent and compliant documents

    Across servicing, it’s not uncommon for servicers to maintain document compliance by supporting hundreds to thousands of letter templates. Maintaining this number of templates—while also ensuring they are controlled, consistent and compliant—is a daunting task. Core servicing platforms have limitations and deficiencies that can make implementing letters difficult. For a large servicer that has a servicing footprint in multiple states, the complexity can become overwhelming.

    Today’s complex regulatory environment demands a new way of managing document compliance.  Dynamic document generation creates a better experience for borrowers.  By leveraging plain language drafting styles, dynamic document generation make documents easier to read and allows for custom tailoring to the transaction, while maintaining compliance that is more critical than ever.   

    While there have been advances in servicing technology since the 2008 mortgage crisis, many servicers still use a myriad array of solutions pieced together to manage the borrower communications process. The end result leads to manual processes, significant overhead, and a solution that isn’t scalable when defaults increase or portfolio sizes grow.  All of these outcomes negatively impact the borrower experience.  

    Maintaining compliance with complex loss mitigation and foreclosure processes is critical for servicers—both from a risk as well as borrower experience standpoint.  In today’s regulatory environment, servicers are held to much higher standards relating to these critical borrower touch points. While delinquencies and defaults have receded to pre-housing crisis levels, the risk of non-compliance has not.   The ability to leverage and implement flexible and scalable solutions to manage processes is critical. Delinquencies and defaults are cyclical in nature.  If servicers haven’t done so, now is the time to prepare before one’s delinquencies and defaults increase.

    Delivering Documents Electronically: Digital Solutions Are On the Rise

    Looking to streamline the delivery and execution of servicing documents, servicers are increasingly looking to adopt digital solutions to electronically route, execute and store servicing documents.  In today’s age, adopting e-delivery solutions in combination with a borrower self-service portal can drastically improve the borrower experience.   Servicers continue to look to leverage these capabilities for loss mitigation to reduce timelines, streamline processes, and reduce costs.  Through borrower self-service portals, the industry is empowering the borrower, which ultimately improves the borrower experience for those facing financial hardship.

    Finding a Solution: Focus on Customer and Current Requirements

    As the industry continues to look to improve the borrower experience through e-delivery technology solutions, consideration must be made to ensure one is aligned with any compliance requirements that may dictate how notices must be delivered to borrowers.  As more states continue to adopt electronic notary capabilities, servicers will have the opportunity to leverage e-sign capabilities to improve the loan modification experience.

    The MISMO Remote Online Notary (RON) Development Workgroup is meeting on a regular basis to create, and ultimately maintain, technology neutral industry standards that will enable electronic and online (aka remote) notarization 

    • Things are moving forward quickly in this area.
    • MBA-ALTA model legislation has already been drafted and published.
    • PRIA and NASS have come out in support of the MBA-ALTA model legislation.
    • One state, Indiana, has just enacted legislative changes using the MBA-ALTA model legislation as the basis for their legislative changes in this area

    When looking for the right solution, make sure it’s for the long run, with one eye toward accounting for an evolving regulatory environment, and another toward making sure your processes continue to be friendly from a borrower experience standpoint. For more information, visit: http://global.wolterskluwerfs.com/MBAServicingPostShow

    About the Author

    Chris Zimmerman, product manager, has spent 15 years in the mortgage servicing space managing all aspects of mortgage servicing. In his prior roles, he has helped some of the nation’s largest servicers implement servicing policies, procedures and controls that ensured compliance with state and federal regulatory requirements; government-sponsored loan modification and refinance programs; and investor/insurer servicing guidelines.  He also helped these institutions develop, implement and execute upon risk and control self-assessments, key risk indicators, and vendor oversight measures. In his role with Wolters Kluwer, he manages the “Expere Servicing” product, a suite of solutions that helps servicers improve efficiencies by managing all aspects of document compliance, from automated document selection to document assembly, packaging and delivery.  



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