With so many moving parts tied to any given loan in a servicer's loss mitigation pipeline – and with the threat of regulatory penalties always top of mind – it is no wonder why servicing organizations have made quality-assurance and quality-control programs a priority. According to panelists who spoke at the Mortgage Bankers Association's 98th Annual Convention & Expo in Chicago last month, specialty servicers are taking a number of steps to avoid having to play catch-up with a quickly changing regulatory world.
The top-line goals are clear: maintain regulatory compliance, prevent avoidable foreclosures and maximize efficiencies. To accomplish these and other quality-minded objectives, servicers report that they are refining their technology systems, ramping up performance monitoring, and homing in on task-assignment and -tracking procedures.
Servicers are still haunted by the industry-wide failure in 2009 to react timely to fast-arriving Making Home Affordable program changes. The breakneck pace of those program tweaks put servicers on their heels, and the industry has been reconciling temporary patches and quick fixes ever since. Although the pace of foreclosure-avoidance programs has slowed considerably, new default-servicing protocols, such as Fannie Mae and Freddie Mac's Servicing Alignment Initiative (SAI), similarly require a high degree of nimbleness.
Quality control ‘is not something that you can think of as an afterthought,’ said Kent Lemon, senior vice president of Saxon Mortgage Services Inc. He said the company is building elements of quality assurance into its SAI processes to ensure that what the company expects will happen actually occurs.
‘It's something we work on day in and day out,’ Lemon said.
He spoke extensively about the customer experience, explaining that Saxon tries to view QC from the perspective of investors/clients and company associates, as well as from borrowers' perspective. So much attention is placed on adhering to policies and procedures that the quality of a borrower interaction can easily be lost in the mix, he said.
To curb that possibility, Saxon launched a customer-service training program for its associates last year. The initiative, which Saxon refers to as ‘Stellar Customer Service Training’ and which Lemon called ‘back to basics,’ includes 27 hours of classroom training. The thrust of the program is to make sure customer-service reps understand borrowers' needs, fulfill those needs and then confirm that the needs were met at the end of the call.
‘We're not always going to tell them what they want to hear, but we are going to make sure they're getting the answer they need so they don't have to call us three and four times and escalate that call to a level that's unnecessary,’ Lemon said.
Lemon said that Saxon is focusing much of its current quality assurance on task management: ensuring the correct associate opens the right task and takes the necessary steps.
The company is also targeting its performance monitoring on the riskiest areas of its operations, such as loan modifications and functions that must comply with fair-servicing regulations and the Servicemembers Civil Relief Act. Saxon has already felt the sting of SCRA noncompliance once, settling U.S. Justice Department claims of SCRA violations to the tune of $2.35 million in May. The company's monitoring is in place not only around interactive voice response systems, call-center operations and technology, but also around pieces of correspondence – ensuring that letters and all communications are timely and clear.
Like Saxon, BSI Financial Services uses quality-control procedures to mitigate risk. The special servicing firm, which administers a severely distressed portfolio, focuses its QC measures on loans that have been delinquent the longest or are determined to be likely candidates for litigation or, possibly, bankruptcy. BSI takes a sample of its portfolio, reviews the sample loans against certain criteria and then identifies exceptions and the criticality of those exceptions, explained Gagan Sharma, BSI's president and CEO.
‘We feel that all exceptions are not made equal,’ Sharma said, adding that exceptions can run the gamut from misapplying a payment to foreclosing on the wrong property.
BSI additionally ties exceptions it finds back to an area of responsibility (e.g., cash processing, customer service, loan boarding) and gives its managers an opportunity to respond to QC findings. The result is a push-and-pull scenario between production and QC, which can result, sometimes out of necessity, in arbitration. BSI thinks it is vital for its QC functions to be performed at the senior-executive level. Keeping the process out of the hands of operational line managers ensures that the production department cannot pressure QC reviews, Sharma said.
A tech safety net
The loss mitigation process is where most borrowers' problems originate, said Kelly O'Bannon, executive vice president of Residential Credit Solutions Inc. (RCS). The company, another high-touch outfit, emphasizes speed in its underwriting department, incenting its loss mitigators to turn around loan decisions within a 24-hour period.
That can be a tall task for a specialty servicer, which answers to many masters and must follow multiple sets of investor guidelines. RCS' online reporting module gives investors a loan-level view into the servicing portfolio, and the company's automated underwriting engine enables investors to approve or deny loss mitigation actions. The engine simultaneously runs delinquent loans through multiple loan workout options, which helps expedite decision-making, O'Bannon said.
‘From a QC side, what that has given us is absolute certainty that every borrower is given the exact same treatment [and that] every set of investor rules is given the same exact treatment inside each one of those pools,’ he said.
The tech boost speeds up QC reviews in which the end goal is to ensure that loans are consistently and accurately navigated through investor-specific loss mitigation waterfalls, O'Bannon added.
However, technology only helps improve efficiencies when servicers commit to reliable data input, noted Souren Sarkar, CEO of product developer Veritiq. Although servicers often have to deal with disparate technology platforms, stand-alone calculators and outdated legacy systems, a goal should be to reduce the number of touch points involved. The solution, he said, involves a centralized change-control management environment.
‘As a software developer, I cannot imagine a non-version-control system,’ Sarkar said. Version-control technology describes systems that can track who authorizes changes and when those changes occur. According to Sarkar, such technology is crucial to responding to quick-changing regulations and loss mitigation programs.
(Please address all comments regarding this article to John Clapp, editor of Servicing Management, at email@example.com.)