The mortgage industry has always faced uncertainty. But as we head into 2021, it’s hard to remember a time when we have met so many unknowns. Will pandemic relief be extended? How many homeowners will be rolled into traditional loss mitigation products? Will additional programs to facilitate relief be developed? All remains to be seen.
One thing we know for sure is that mortgage servicers and subservicers need to be ready for anything. This requires strategies that supersede any approach they’ve used to date. Specifically, it requires higher levels of automation — because future scalability and transaction velocity challenges will not be overcome with yesterday’s technology.
Can you roll with regulatory impact?
Over the past nine months, we’ve already seen a tremendous amount of change when it comes to COVID-19 guidelines and flexibilities. This will continue through the end of the year, which will add to the intricacy of developing a strategic approach for 2021. During the November alone, Fannie Mae and Freddie Mac extended and clarified flexibilities involving loans in forbearance, while HUD extended much of its FHA guidance at the end of October. The VA and FHA have also issued CARES Act guidance that does not specify an end date, but rather states that requirements are “temporary.”
Even if extensions continue in 2021, the industry will eventually face multiple waves of homeowners requiring changes in default status. This may simply be borrowers who need to migrate from forbearance to an alternative payment plan or catch up on deferred payments. But it will happen en masse and closely coincide with a lift on foreclosure moratoriums.
The convergence of these events — each of which involves reporting, updating, exception processing, eligibility determination, document execution, and communication — will need to be layered on top of new or expanded regulatory and requirement changes that apply to distressed borrowers. All of this will amount to a huge and daunting challenge for servicers.
How can servicers be ready?
Gone are the days when servicers turned to internal IT staff to ensure nuanced and proprietary features were met. Not only was such a strategy costly, but it often stalled results. The key to preparation today lies in process automation that far surpasses pre-pandemic solutions for default servicing. But what does this look like?
From an operational perspective, a servicer’s technology must encompass highly intuitive workflow automation paired with expert decisioning that is rendered in real time, meets investor requirements, and incorporates corporate overlays and proprietary guidelines. Servicers also need technology that is sophisticated enough to access, identify, verify, and make decisions using multiple synchronized resources for data, and then drive the actions and data seamlessly throughout various systems. Sounds complex, yes, but the technology is there if servicers know where to look.
Evaluating modern solutions for 2021 means taking a closer look at the capabilities servicers truly need. Take the need to keep up with borrowers seeking relief, for instance. Homeowners have become all too familiar with generic and scripted responses to their genuine personal needs. Over the next several months, greater numbers of borrowers under duress will create even greater pressure to deliver a better, faster customer experience.
The answer is providing access to information and outcomes that are both personalized and can be self-served. Fortunately, with modern technologies, servicers can provide borrowers with 24/7, self-serve, no-touch automation that delivers immediate responses to questions, access to associated workout documents, individualized eligibility determination, and workout program selection — all at the borrower’s fingertips.
As new and rolling delinquency events occur, it becomes more crucial than ever to engage a trusted technology provider that not only understands the business, but knows how to manage increasing costs to service, resource volatility, historically high delinquency, and unpredictable relief administration. The key is identifying providers with robust, nimble Software-as-a Service platforms that already store the complex loss mitigation rules that underlay default business processes. Combined with self-serve capabilities, agile methods, automated workflow, and decisioning, SaaS solutions can readily support the flexibility and innovation servicers require to create a contemporary experience for their borrowers.
With fresh workflow and process automation technologies that leverage data, communication, and proprietary business intelligence, servicers will be able to deliver the results-oriented experience that will be vital in the coming year. But that only happens if they are able to break free from antiquated systems and latent operational and delivery practices that have plagued their operations for too long.
Once they do, they will not only have the control needed to manage the uncertainties that will come in a post-pandemic environment, but excel in spite of them.
