As experienced default servicing professionals know from firsthand experience, this is an industry where the old cliche “the only constant is change” applies all too well. But, even in a business where change is expected, the last several years have been remarkably turbulent, rife with extraordinary new regulatory mandates, challenging new compliance obligations, and a bevy of local and federal rules. The result is a default legal process that can feel micromanaged - packed with time-consuming (and costly) new steps and complications.

Although this new, exceptionally robust regulatory framework and detail-oriented oversight and compliance mindset may be the headline, it is far from the full story. Businesses and individuals alike still have to wrestle with all of the usual challenges and complexities - from operational details to bottom line numbers - all in the context of an evolving marketplace and a rapidly changing industry.

With so many moving parts and new issues and obligations to keep track of, is it any wonder that so many servicers, lawyers and investors feel overwhelmed or frustrated with the pace of change and the new responsibilities that come along with that change?

There is another way to look at all of this, however. Although frustration is understandable (and perhaps even inevitable), a glass-half-full perspective leads us to some very different conclusions about the changes that have taken place - and continue to take place - across the industry. The reality is that there are some meaningful benefits that accrue for those who have worked through and adapted to the tsunami of change that has swept across the default landscape. Although the journey may have been arduous at times, the destination will turn out to have been well worth it.

What follows are some of the many benefits enjoyed by those who have worked through the last few years and tackled these new challenges.


Legal insights

There is no question - at least, in our firm’s case - that the industry’s evolution over the last few years has helped employees gain a deeper and more sophisticated understanding of the legal ins and outs of the business. Partly because they need to - and partly because they want to - our firm partners have become more intimately involved with every aspect of the day-to-day operation. Today, those partners make it a point to participate in audits, regular client calls, and in-house team meetings and process and technical development meetings. In addition, they find time to participate in and contribute to professional development and leadership initiatives, such as local bar seminars and national task forces.


Stronger knowledge base

Employees’ understanding of all aspects of legal work and the industry has also improved dramatically. Although it may have been much easier when small inefficiencies could be covered by high volumes, there was no real need to worry inordinately about “the spend.” At our firm, we make every effort to use our time and personnel resources wisely, but that new attention to detail is most clearly evident with respect to financial efficiency. Minimizing wasteful or unnecessary spending is critically important at a time when sometimes costly new regulatory obligations are an everyday reality. Value is king, whether one is purchasing office supplies, upgrading tech infrastructure, dealing with human resources issues or cementing relationships with vendors and professional partners. Not only is daily financial reporting a new part of our firm’s operational programming, but budgetary goals and financial forecasts have also become more sophisticated and accurate as a result.



Cultural changes

The cultural change across the industry has absolutely contributed to a corresponding shift in company culture. At our firm, we are more collaborative and engaged with each other than ever before, prioritizing clear and consistent communication and making sure that opportunities to learn and grow from the insights and experiences of our coworkers do not go to waste. Employees spend more time together both inside and outside the workplace, and management makes a conscious effort to visit with coworkers during the workday to pick their brains for ways to do jobs better and more efficiently.


Stronger leadership

Strong new oversight measures have created a professional landscape where firms with independent operators have a distinct advantage. Leadership and personal initiative are rewarded in the current environment, and our firm has responded accordingly: From attorneys and operational personnel all the way up to managers, executive leaders and ownership, everyone is expected to get involved. More than at any time in our industry’s history, managing a default law firm needs to be a collaborative effort. Employees must be pushed to step up to embrace new leadership roles, and, to their credit, many have responded. Another noteworthy change is that decision-making is no longer mandated exclusively from on high - the boardroom and the break room are equally viable and valuable sources of big ideas and innovations.


Smart use of technology

Technology and automation have utterly transformed the default servicing industry in ways big and small, but part of the process of learning to adapt in the years since the financial crisis has been understanding that the appropriate use of technology requires setting and monitoring a sustainable balance between people and machines. Once one identifies that balance point, one needs to review processes, protocols and results often to ensure that one is operating at peak efficiency and with sufficient oversight. Gone are the days when it might be possible to have new employees processing files their first day on the job, and we have a better understanding of not only the benefits of automation, but also the limitations. The goal is to successfully leverage the efficiency, processing power and automated checks of technology without losing the human element of oversight and personal engagement with the work.

Ultimately, although the last several years have been unique and challenging, the fires of change have forged an industry that is more efficient, more engaged and more informed than at any other time in history. We believe that the industry as a whole has come a very long way in a very short time. Going forward, it seems clear that the hard work that has been done by so many to evolve and adapt to new realities will continue to pay off and that the frustrations of the past will serve as the foundation for sustained successes in the future.


Marcy Ford, Jeffrey Raff and Jeffrey Weisserman are partners in Michigan-based Trott Law, which specializes in all facets of real estate finance legal work, including litigation, bankruptcy, eviction, REO and default servicing. They can be reached at mford@trottlaw.com, jraff@trottlaw.com and jweisserman@trottlaw.com, respectively.

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