BLOG VIEW: Navigating the current market environment is posing challenges for all industries. In the case of mortgage servicers, the focus must now be heavily placed on proactively monitoring portfolio risk.
The mortgage servicing industry is expecting loss mitigation to skyrocket in the next 30 to 60 days due to the adverse economic impacts of COVID-19. The Federal Housing Finance Agency predicts that the number of delinquencies caused by the coronavirus outbreak could exceed the subprime mortgage crisis.
On top of this, a high number of GSE-backed loans are eligible for forbearance and subsequently, loan modifications. In fact, The Mortgage Bankers Association reported that the overall share of loans in forbearance had risen to 8.16% as of May 10. That is compared to an overall forbearance rate of 0.25% before the onset of the coronavirus.
In addition to managing an influx of modifications, servicers must also maintain a high level of customer service. Many consumers are experiencing significant economic hardship. It is critical that servicers clearly communicate the options available to borrowers who are unable to make their mortgage payments due to financial strains.
These economic challenges require servicers to have a greater insight into their portfolios. They must be able to better manage their risk exposure and drive significant increases in operational efficiencies. Digital transformation of the servicing process has taken on a new urgency, evolving from something that provides convenience, efficiency and cost savings to an essential requirement given ongoing pandemic concerns and risks.
To best accommodate the influx of applications and requests, the digital mortgage servicing journey must focus on streamlining the process through modern technologies and data-enabled solutions. With the industry landscape moving and adapting quickly, servicers must implement technology solutions that enable them to efficiently and effectively manage shifts in the marketplace. At the same time, they must ensure that they are meeting the demands of the consumer without putting themselves at undue risk.
Servicers that can effectively leverage third-party data in a secure environment can gain the insight into their portfolios necessary to combat issues ranging from mitigating delinquency risk, defaults and foreclosures, as well as increasing efficiencies with non-performing loans and the loan modification process. Servicers can also quickly and securely make decisions in a compliant manner, improve profitability and predictability.
Having all this information available electronically, in one location, also drives workflow automation and helps reduce the need for unnecessary manual reviews.
This insight also helps to identify opportunities, such as determining which consumers could benefit from refinancing, helping those individuals to avoid default. This not only helps the consumer but also mitigates risk for the servicer and helps deepen the customer relationship.
Smarter insights drive smarter actions.
Having the right combination of data and analytics can provide the insight and confidence servicers need to help anticipate and capitalize on fast-moving market opportunities. And, adoption of digital processes can increase operational efficiencies and be crucial to success in today’s market.
The most successful servicers are those that are able to best meet customer expectations of speed and convenience and deliver on that in a way that ensures they are not putting themselves at undue risk.
Jennifer Henry is vice president of strategy and marketing with Equifax mortgage and housing services.