How Mortgage Servicers Can Prepare For the Next Downturn


When mortgage rates fell during the first half of 2019, it surprised housing industry watchers, many of whom had been predicting that rates would turn upward.

Still, the surprise drop in rates was welcome news for home buyers, sellers and owners.

Here we are in October and rates continue to decrease. As such, millions of homeowners can presently benefit from refinancing. Meanwhile, buyers are fiercely competing for a short supply of homes. 

But the market isn’t quite as tilted in favor of sellers as it seemed six months ago. Home prices continue to rise, but not as fast as they have over the past few years – which is encouraging for the many would-be buyers who struggle with affordability.

Recent rumblings of a recession, coupled with signs of a cooling housing market, have prompted many real estate professionals to begin preparing for a possible market downturn. 

While no one individual or organization controls whether the country enters a recession or not, there are steps mortgage servicers can take to ensure they stay competitive regardless of what the future holds. 

For one thing, they can use technology to mitigate risks and place themselves in an advantageous position as the market begins to transition. Today’s technology platforms can support multiple parties, facilitate efficient communication, offer a seamless customer experience and adapt to an ever-changing regulatory environment for servicers to succeed. The result is streamlined processes, faster transaction times, improved compliance and increased data accuracy. 

Today’s market requires flexibility along with the ability and willingness to adjust or pivot strategy. There isn’t a one-size-fits-all approach. Technology needs vary depending on the type of organization and its defined goals.

Every stakeholder involved in the lifecycle of a real estate transaction will be impacted in the event of a market downturn. As a result, it is critical to maintain an open dialogue with all parties involved in the process including investors, technology providers, servicers and vendors.

Tactics and strategies that garnered success in previous markets may now be irrelevant. If servicers are not nimble, they may begin to experience challenges, not only concerning the disposition of assets but with residual consequences for vendor support as well.

To ensure sustainability during a market downturn, mortgage servicers must closely examine their current infrastructure, services and tools to ensure they provide the ability to not only track processes, but also allow users to automatically analyze the viability of different scenarios.

It is important that there be a “virtual meeting place” where servicers, agents, vendors and consumers can all connect and communicate around real estate transactions.

What follows are several important questions that a servicing organization should be able to answer.

1. Is there connectivity with third parties?

2. Connectivity with the vendors? 

3. Transparency between all? 

4. Can the third-party systems communicate with each other, so individuals are not duplicating work via manual entry, thus also helping to maintain data integrity?  

For mortgage servicers, it is vital that all data be maintained in a single environment and not in several different silos – and that all relevant parties have immediate, real-time access to the data.

The need for strong and effective internal and external compliance systems has never been stronger. To be prepared for the future, mortgage servicers must implement solutions that meet a range of demands while maintaining standards, as more freelance and contract labor is brought onboard.

Taking a proactive stance to actively responding to the changing market conditions can ensure that a servicer is able to adapt to whatever environmental challenges it may face.

Technology solutions that simplify mortgage servicing processes are what will get servicers through the next cycle – and those changes could be here sooner than we think.

Angela Hurst is senior vice president for USRES/RES.NET, a provider of technology and services to the mortgage servicing industry.

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