Newrez's Shane Ross on servicing's past, present and future

July 9, 2024 11:21 AM

Shane Ross, head of mortgage servicing for Newrez, is utilizing a mix of past experience and new technology to manage the wholly-owned Rithm subsidiary through unusual times.

"I think that this is an interesting cycle and one we haven't necessarily seen before," he told NMN. "Consumers have a tremendous amount of equity in their homes. At the same time, inflation is putting pressure on their ability to afford normal day-to-day expenses."

In an interview about strategies for improving the borrower experience in this environment, Ross addressed topics ranging from the history of modifications to the company's recent Specialized Loan Servicing acquisition. He also weighed in on the use of new artificial intelligence technology in conjunction with its proprietary system.

An edited and condensed version of his responses follows.

How did you get your start?

I've been in the mortgage industry for over 25 years. I started in Dallas working for a company called Capstead Mortgage back in the 1995-96 kind of timeframe. They were purchased by Homecomings Financial, which was GMAC-RFC at the time, and spent a number of years there. They purchased a company in San Diego and I was there for a little while managing the integration with that organization.

I went to Houston, Texas, to visit a friend of mine and just happened to run across a gentleman by the name of Larry Litton. Larry Litton Sr. and Larry Litton Jr. were pioneers in the mortgage industry and I decided to join their organization in 2000. I spent a number of years at Litton Loan Servicing as their chief operating officer and got a front row seat to the mortgage crisis that took place back in 2007-2009 kind of timeframe.

Our focus then was how do we protect homeowners and keep them in their homes? We were the first servicer to start rolling out modifications on a large scale.

During my time at Litton, I got the opportunity to visit and work with a lot of great leaders. In addition to the Littons, people like Jack Navarro, the longtime president and CEO of Shellpoint Servicing, people like Bruce Williams, vice chairman at Newrez, and others that were there were significant in the industry. We were a large subservicer for companies like Goldman Sachs. So I was able to build a lot of industry relationships over the years.

Eventually, Litton got sold to Ocwen Financial and at that point I left the organization and went to work for a company called Selene Finance, which was a smaller, boutique special servicer at the time. Then from there, I came over to Newrez.

Where do you think consumers are in the credit cycle?

I think that this is an interesting cycle and one we haven't necessarily seen before. Consumers have a tremendous amount of equity in their homes. At the same time, inflation is putting pressure on their ability to afford normal day-to-day expenses.

In this environment, consumers appear to be fighting harder to maintain their mortgages than in prior cycles because of equity that they have and due to low unemployment rates. Delinquencies are pretty much at an all-time low at this point, and that's across almost all of our product sectors.

I think what we're finding is that consumers are trying to find ways to maintain the price of their homes but there are pressures like rising taxes, insurance and other types of expenses. So we need to make sure that we're working to partner with the homeowners to find solutions.

What strategies did your recent servicing awards reflect?

We were the only servicer to receive all three elements of a Fannie Mae STAR award: general servicing, solution delivery and timeline management. A lot of work went into it because at the same time that we achieved that award, we were growing our portfolio pretty substantially.

Most importantly, Fannie looks at how do you take care of the consumer? So we used our technology, processes and risk management controls to deliver what we felt was an improved customer experience. We're one of the few servicers that has its own proprietary technology, which allows us to react quickly to changes that are in the marketplace.

We find ways to deliver proactive interactions with our customers in line with what may be happening in their lives, such as increases in tax or insurance payments, and build self-service tools to address that. For example, we built loss mitigation technologies with Fannie allowing consumers to go through a complete documentation and underwriting process for a modification online, if one was needed, without ever having to talk to an agent.

AI helps us be more predictive about what consumers need and to push relevant information out to them. Our employees are fielding telephone calls, or having to answer questions for consumers, and AI helps them be more effective in those types of scenarios.

There are emerging rules around AI. How do you address those?

We are being very cautious with our AI development and thoughtful about the downstream impacts. One thing we do is focus on staying in control of and using our own data. We test thoroughly before we roll anything out, whether it be to consumers or our employee base. We want to make sure we get the results that we want and that those results are accurate. We're being very methodical about our rollout of AI and trying to make sure that it's used for the right purpose, which is a good consumer experience.

I hear you focus on cost leadership. What does that mean?

Cost is a key factor for servicers, so we want to make sure we manage it, but it's got to be done in a balanced way. It cannot hinder the consumer. What we've found is that if you can leverage good technology and training, you can drive down cost of service while delivering a better consumer experience.

You recently closed the SLS acquisition. What happens next?

It was an unprecedented acquisition, we've been very proud of what we've been able to start to accomplish with it. The SLS organization had a portfolio of just under $150 billion, with $45 billion owned and the rest servicing for third party clients, with the latter being a match for a big portion of our portfolio. We brought the entire organization onto our platform. We immediately migrated the loans onto our technology vs. going through a more traditional servicing transfer. Through the migration we were able to keep the consumer's loan number and other mortgage information the same, with the goal of minimizing disruption.