Fluctuations threatening to roil the mortgage market are making managing servicing costs the priority once again. No matter how long this accelerated downturn in originations may last, servicing will need to work hard to keep up with internal demands, and that will require rethinking traditional approaches to workflow and metrics.
Our industry is guaranteed to see a rise in the importance of mortgage servicing rights and options to keep homeowners in their homes, and with the increased need for assistance, faster responses and resolutions comes tremendous opportunity to improve efficiencies.
Like most service-based industries, success in the mortgage industry depends upon consumer actions. Customers crave personalization and speed. At the same time, consumer-enabled technologies and regulations requiring single-point accountability have combined to thrust our industry into an era where the only effective go-forward strategy is proactive engagement.
But traditional benchmarks for mortgage servicing success have historically been reactionary rather than in line with the kind of proactive approach that's essential for optimizing servicing efficiency.
Call center metrics, such as calls per hour per agent, total talk time, average speed of answer, and abandonment rates provide limited insight as to whether a portfolio is on its way to reperformance. Also, the operationally laborious workflows these metrics reflect drag down revenue and increase employee frustration.
Instead of tracking the number of calls per employee, measure the number of homeowners helped. That will greatly reduce the amount of time servicers spend on low-level tasks and allow workforce energy to be concentrated on higher value outputs.
That is an important aspect to reducing unnecessary turnover that otherwise adds operational costs. Keeping trained servicing professionals in their roles longer reduces friction and increases call center efficiency by 50%-75%.
Framing organizational goals around seamless engagement and retention also increases the likelihood of establishing early quality right-party contact. Digital-first servicers that adjust their operations to track and monitor payment slippage allow for targeted outreach that will inform homeowners help is available should they need it. This ultimately decreases the number of loans that progress further into default or distress, reduces costs, improves gross profit and safeguards services that homeowners are legally entitled to and deserve.
Real-time tracking also positively affects revenue goals achieved through servicing fees, performance incentives and commissions for additional products. Top lenders understand this buying lifecycle and factor it into their earnings projections. Establishing servicing operations that focus on options to speed up collaboration and communication is essential to meeting these targets.
Speed of communication is another metric that digitization is ripe to address. Instead of taking weeks to provide information to homeowners by mail or phone, resolution options can be sent digitally. While many people prefer the "human element" when it comes to costly investments, that doesn't necessarily hold true when people face financial difficulty.
This is especially true when consumers are in need of assistance during hardship. Servicers who offer various options on loss mitigation strategies to the consumer empower them to make their own decisions in advance of default.
Mortgage servicing is about more than loans: it's about the humans involved and making sure their futures are in good hands. This means taking into account family and financial circumstances while also ensuring timely delivery of interest payments to investors in ways that balance all stakeholders' needs.
Management and care for the life of the loan as a responsible provider includes being mindful of the economy as a whole. Cost of servicing rises rapidly with delinquency status, and so do noncompliance penalties that have risen over 45% in the last 10 years.
To avoid the risk of harm, we should be looking to compliance management systems to identify and mitigate risks like fair lending threats in addition to technology more focused on efficient loan processing. Fundamentally, when we build a better system for the consumer, the investor benefits as well.
Leaders who take the traditional power leadership model and turn it completely upside down in this way are not only a revolutionary group, they are the highest performing in their class. They better serve the consumer and greatly reduce costs associated with servicing.
"Servant leadership," in other words, is essential because it focuses on the growth and well-being of all end clients. Servicers who take this approach include customer-facing employees, and the consumers themselves, in the decision-making process.
Moving management and personnel interaction away from controlling activities and toward a synergistic relationship improves intended outcomes. It is not only the right thing to do but also results in the retention of existing customers and the acquisition of new ones.
Overall, our industry greatly benefits when success metrics and benchmarks align with this philosophy. The mortgage servicing space is in need of a new lens through which we measure performance.
A connected infrastructure with the right set of behaviors and practices will streamline operations, improve operational efficiency and decrease the number of nonperforming loans, thereby reducing costs and raising revenue, all while ensuring consumer protections and accessibility stay intact.
Automation continues to be the solution of choice, but it will mean very little if we measure the wrong metrics for success. Servicers must adjust their performance indicators to embrace a consumer-first approach in the new, digital age of servicing or risk falling behind.
