PERSON OF THE WEEK: Smooth and efficient MSR transfers are crucial to keeping borrowers happy and achieving operational excellence. Unfortunately, smooth MSR transfers are pretty rare, which is a problem given how active the MSR market has been lately. To learn more about how servicers can smooth out these challenging transitions, MortgageOrb interviewed Toby Wells, president of Cornerstone Servicing, a division of Cornerstone Capital Bank, SSB, which recently launched a subservicing business designed to empower homebuyers to be smart homeowners.
Q: What emerging technologies are reshaping mortgage servicing transfers, and how are they helping servicers achieve operational excellence and meet borrower expectations?
Wells: From a customer-facing perspective, communication is changing because of technology. For example, with conversational interactive voice response (IVR) technology and similar tools, a new servicer can recognize when a transfer customer is calling and deliver custom messaging to them even prior to the actual onboarding process. When supported by AI engines and incorporated into a servicer’s workflows, IVR tools can be extraordinarily helpful with delivering information more effectively. Ultimately, these advantages translate to a better transfer experience and a dramatic reduction in post-transfer delinquencies.
Of course, there are technologies that have been around for some time that still play a key role when onboarding customers, particularly when it comes to setting expectations. A servicer can set up unique landing pages for each transfer with information about what will change and when; FAQs; and contact information.
We make the landing page easy to access via a QR code on the welcome letter we send out, include the URL in our IVR messaging, and link to it within any electronic communications. Generally speaking, applying technology broadly to the communication process is helping us cast a wider net, engage more borrowers, and increase our chances of creating a positive first impression.
Q: What strategies are servicers using to improve communication with borrowers and other stakeholders? How can they ensure borrowers are fully informed and supported throughout the onboarding process?
Wells: A sound communication strategy really boils down to thoughtfulness. Historically, transfers have been a source of confusion for homeowners, who are often surprised to be suddenly dealing with another company they’ve never heard of. Having FAQs online with answers to questions like, “Is my autopay going to transfer?” or “Does my payment due date change?” is helpful. A virtual assistant can answer questions like these for customers 24/7, too. Offering short videos on these topics can also add a human element that a letter or email doesn’t convey.
Servicers also just can’t rely on a single form of communication. For example, an increasing number of consumers no longer check their snail mail regularly. These days, following a welcome letter with an email or text message that highlights the most important details borrowers need to know makes a big difference.
All communications need to be digestible and actionable, too. We try to make it really easy for borrowers to understand what they need to do and when. It’s a way of warming people up and getting a positive reaction. Then, make sure that same message is consistent across all communication channels.
Q: How are regulatory changes impacting mortgage servicers and MSR trades? What steps can servicers take to stay ahead of the curve and ensure compliance?
Wells: COVID-related changes are still creating an assortment of challenges. Many were kind of enacted on the fly, too, when the situation was still developing and the impact was unclear. The way one servicer has treated COVID-related guidance and issues may not be the same way the previous servicer handled them, either.
There’s also the FDCPA 7-in-7 rule, which can get really complicated in a transfer situation because you already have outbound messages about the servicing change. In addition, GSE requirements involving the storage of HMDA data went into effect this year, which many servicers didn’t track before because they never had a reason to. Some investor-related changes to loss mitigation guidance have shaken things up, too.
Keeping up with regulatory changes takes a lot of time and resources. Coordination between a prior servicer, new servicer, and the MSR buyer in the middle is critical. It’s important to plan each step, how things will be done and when. This is one reason many servicers are leveraging a subservicing partner with an adept compliance team, smart technologies, and a robust compliance management system in place. Having a customer-centric mindset is also critically important. We put a lot of thought into our transfer experience, which helps us avoid complaints and other potential compliance issues.
Q: What role do third-party vendors and service providers play in facilitating efficient MSR transfers, and how can servicers know they have the right partners in place?
Wells: If one is buying MSRs and leveraging a subservicer, the subservicer should have an effective transition plan in place—literally, a written plan about how they’re going to transfer data, communicate with various parties involved, deal with compliance risks, and so on. One can’t just assume everything is on auto-drive and it’s going to work.
Having a partner with great technology is also important. It’s not uncommon for a servicer to have a core servicing platform and wrap around systems for loss mitigation processes, their call center operations, or back-office processes that do not all update simultaneously. This can result in a customer service agent relaying information to the borrower that’s not entirely up to date or is inconsistent.
Finally, one should know the subservicer’s game plan for triaging loans and how prepared they are to tackle the unexpected. For example, what is their plan to avoid delinquent tax payments? Will they be able to handle an increase in call volume, or will they augment it with a partner? Having a partner that is able to answer all these questions is key.
Q: What are some key best practices for mortgage servicers to follow when planning and executing MSR trades?
Wells: Transferring loans from one servicer to another can create a variety of pain points for customers. Some are easier to predict than others. Whatever the issue, having the means to quickly communicate with customers in a variety of ways is critical. The best rule of thumb is to always have backup plans. For example, transferring customers will quickly create their new online account and take advantage of services like recurring ACH payments. But what’s the plan for the remaining customers? How will the servicer reach them and prompt them to register online? And, for borrowers who use third-party bill pay services such as their bank, there needs to be a process to remind them to update their payment settings so their monthly payment does not continue going to the prior servicer.
One really needs to get into the details, find potential points of confusion, and make sure the messaging is consistent across every touchpoint—email, IVR, virtual assistant, website and the customer service team.
Internal communication is equally important. Servicers need to make sure they are informing stakeholders within the organization and explain the strategic significance of the transfer, key dates, and timelines to help ensure everyone knows what to expect and why.
Addressing all potential points of friction is what one does when one cares about how a customer is treated. That’s valuable from a brand perspective, but also from a delinquency and performance perspective. Ultimately, it results in stickier clients and a higher-performing portfolio.
Q: How can servicers leverage data analytics and artificial intelligence to streamline the MSR transfer process and enhance borrower experience?
Wells: Having an engine that’s able to run a number of logical condition testing prior to the MSR transfer is extremely valuable. If there is an anomaly, one can go back to one’s data maps and make sure the portfolio can transition effectively.
AI can be used at every point during the transfer process – and across servicing functions in general – to increase a servicer’s ability to listen. For instance, it can be used to transcribe inbound calls and identify certain keywords or anticipate what someone may be calling about and create personalized messages back to the borrower. Leveraging AI in this way can also help servicers anticipate and respond to borrower needs faster.
Q: What are the potential risks associated with poorly executed MSR transfers, and how can servicers proactively address and minimize these risks?
Wells: Beyond compliance and financial risks, which are on the table for any transfer, reputational risk is also at play. J.D. Power’s 2022 U.S. Mortgage Servicer Satisfaction Study found that loan transfers generally hurt overall customer satisfaction. It’s one of the sharpest pain points for borrowers—and it can be really difficult for servicers to overcome a lousy first impression. For this reason, we invest a lot of time and thought into our transfer experience to make it as smooth as possible.
For example, one common question customers have is when and how to make their mortgage payment to a new servicer. We address this with thorough and consistent communication across multiple channels. This helps us reach every customer and has shown to keep the volume of inbound customer inquiries at a manageable level—even with large transfers exceeding 50,000 loans. When a customer service team is inundated by transfer-related inquiries, it can create friction for months.
Having a user-friendly website and app also helps us manage call volumes in the wake of a transfer. We help customers know when and how they can create their new online account to make payments, set up autopay, update their communication preferences, and find answers to other common questions, all on their own time.
