Using Technology To Solve Default Servicing Challenges

12750_92850011 Using Technology To Solve Default Servicing Challenges REQUIRED READING: While the mortgage servicing industry continues to adapt and evolve to accommodate new legislative developments, it seems increasingly clear that this state of affairs is a process, not a discrete event, and that the contours of today's regulatory landscape will likely be unrecognizable in the not-too-distant future. With changes already in the legislative pipeline and regulatory uncertainty becoming the ‘new normal’ for servicing professionals, it is clear that business as usual will not get the job done.

For many servicers, compliance has taken on a prominent level of significance with respect to their mid- to long-range planning. While responsive and responsible servicing professionals have always taken great pains to comply with regulatory mandates, the challenges presented by this new era of change demands more comprehensive solutions. As a result, those solutions will likely involve the adoption of both new technologies – accompanied by the technical infrastructure they rely on – and new processes, policies and procedures designed to take full advantage of this new technical capacity.

One of the most promising and popular ways to leverage these technologies is through the introduction of powerful, new case management systems designed to deliver streamlined and sophisticated workflow processing capability to the default servicing process. The benefits of such a system are potentially profound: a high quality workflow processing that can reduce or eliminate errors, strengthen security, improve accountability and auditing capabilities, and make it possible to process a higher volume of work more quickly and accurately.

While the technical horsepower of these new technologies is impressive, the efficiency, flexibility and utility of each system are largely dependent on the workflow processing architecture. Ensuring that the workflow processing is designed, optimized and implemented the right way is critical, especially considering the significant financial investment that these systems represent.

Understanding industry compliance trends, appreciating what those trends might mean for individual firms, and maintaining a solid grasp of workflow processing best practices will ensure that default servicing professionals implement their systems in a manner that boosts their processing capabilities and meets the demands of new compliance realities.

Look back, move forward

When it comes to workflow processing, moving forward often involves looking back: Implementing new systems and software means relying on best practices dictated not by a trendy idea or the latest industry fad, but by lasting notions of common sense, logic and professional responsibility.

In the book ‘Race Against the Machine,’ authors Erik Brynjolfsson and Andrew McAfee make the point that, to a large extent, our technical advances have accelerated faster than their practical application. As a society, the future will not be one of technical capacity, where the exponential leaps forward in speed and processing power are already ahead of the implementation curve, but of utility instead. Indeed, the biggest innovations going forward will likely be predicated not on as-yet-undeveloped technologies, but on our ability to make more efficient use of the powerful new technologies that are already available to us.

To put it another way: If we want to get from point A to point B more efficiently, it will not be a bigger motor that makes the difference. Instead, it will be the skill of the driver and the accuracy of the map that outlines a better route. In the mortgage servicing industry, quality workflow processing is that better route.

The extent to which next-generation technical capability represents a potential game-changer for default servicing operations is already clear in the disconnect that occurs when auditors request access to a procedures manual as part of their standard auditing checklist. Quality workflow processing ensures that there is no need for the old-school procedures manual. Just as the desktop rolodex has gone the way of the dinosaurs in favor of digital address books in laptops and smartphones, printed procedures manuals will soon be a distant memory.

Today, the procedural logic that was set forth in a literal procedures manual is encoded in the technical architecture of streamlined case management systems. The laborious process of reading through binders and policy manuals can now be consolidated down to a simple worksheet, and servicing professionals can utilize a basic flowchart overview or one-page process map to provide auditors with a clear outline of the workflow process and technical architecture embedded in the software.

Beyond the conveniences of shorter audits and less paperwork, the most important aspect of high-quality workflow processing and the best new case management systems is their ability to facilitate extraordinary advances in speed, flexibility, accuracy and reliability. Lest we forget, this is an industry of extremely large file volumes, and a relatively minor oversight can have costly consequences.

Best of the best

The precise functionality and technical and operational details may vary slightly from one system to the next, but all of these new systems are based on the same core workflow processing characteristics. Let's consider the basic workflow best practices that have stood the test of time and how the new technologies can enhance the servicing process.

For starters, high quality workflow processing is capable of enhancing both risk mitigation efforts and processing efficiency. The relationship between the two is not incidental; it is complementary. When designed correctly, the same processes and systems that streamline workflow can also function simultaneously as network and data security boosters.

There is also the question of flexibility. The best new systems and software are not only capable of meeting the challenges of today's professional environment, but they are also able to evolve and adapt quickly to new regulatory realities.

The turnaround time, with respect to changing the processes or parameters of the best new systems, is as short as days or even hours. And because the technical infrastructure remains the same and technical and procedural safeguards can be built into the system, training employees to respond to those changes is simpler and less prone to user error.

While flexibility is important, the complexity of new systems and software requires servicing professionals to implement a standard change management process that can be used to ensure that workflow updates are integrated in a manner that does not cause problems. Testing and review for significant changes typically takes about a week, but important changes can be implemented faster in emergency circumstances.

And, of course, every servicing professional understands the importance of deadlines and timelines. The default servicing process must be governed by a series of guide points within a larger timeframe.

In addition to boosting accountability and ensuring that files do not slip through the cracks, timeline standards make it possible for servicing professionals to distinguish between files that are ahead of schedule, on schedule or behind schedule. This enables default servicers to set priorities and utilize resources accordingly.

Step-dependent processing is a valuable tool that should be a part of every case management system. Superior workflow processing relies on step-dependent processing to balance access and security while optimizing workflow.

While there is no telling what regulatory developments are around the corner, servicing professionals can ensure that they are prepared for anything – and are equipped to compete in a competitive and evolving industry – by implementing a quality case management system and adhering to workflow processing best practices that will make the process as efficient as possible.

Ron Redmer is chief information officer of Farmington Hills, Mich.-based National Default Exchange LP. He can be reached at


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