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Servicing Expo 2022: Balancing loss mitigation & compliance

By
Sanat Mohanty
May 12, 2022
4 MIN READ
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Mortgage Banker Association is all set to host its first servicing conference of the season - Servicing Solutions Conference & Expo 2022. This could not have come at a better time.

As share of loans in forbearance dropped to 1.41% of servicers’ portfolio volume, there is increased pressure on servicers to strike a balance between managing loss mitigation and complying with wide-ranging consumer protection guidelines.

MBA Servicing Solutions Conference & Expo 2022 is purposed to help servicers draw up a strategy to attain the triple goal of improving operational efficiency, managing loss mitigation and navigating regulatory compliance. Let us look at what servicers can expect from this conference.

The holy trinity of loss mitigation, regulatory compliance and operational efficiency



Theme 1: Navigating post forbearance loss mitigation

Post forbearance loss mitigation is, perhaps, the most pressing priority for mortgage servicers. Firstly, servicers need to proactively reach out to borrowers and assist them in choosing the right repayment option. At the same time, servicers also need to analyse borrower’s credit behavior to identify signs of financial stress or likelihood of default. The problem is that close to a million homeowners are still in forbearance - which is going to stretch the bandwidth of customer service teams involved in proactive borrower outreach.

In order to drive operational efficiency, servicers could explore a few options. Firstly, deploy automation in an area like loan boarding & servicing portfolio QC to free up head-counts. These personnels could be re-deployed temporarily to handle borrower communication. Next, outsource non-critical processes to mortgage BPO experts, to free up bandwidth for one on one customer relation management. 

Realizing that servicers need expert guidance in navigating loss mitigation operations, the Servicing Solution Expo has included a breakout session on loss mitigation:

In this session top servicers and compliance professionals will share insights on how to help homeowners gracefully exit forbearance while minimizing embedded risk in their servicing portfolio. Hopefully, it will also help servicers uncover cost containment and operation optimization strategies, as well. 

Theme 2: Managing compliance with evolving servicing regulations

As the forbearance period ends, there is significant confusion amongst borrowers on the different repayment options and how to apply for them. This puts servicers in a tough spot because there may be many borrowers who may be ghosting the servicers by not making payments without a plan. Hence servicers need to actively work with borrowers on their post-forbearance options.

At the same time, servicers have to remain compliant with a myriad of servicing compliance requirements such as:

  • RESPA / Regulation X
  • TILA / Regulation Z
  • Fair Debt Collection Practices Act
  • CARES Act Sections 4021, 4022 and 4023
  • CFPB Bulletins

& the list goes on…

They have to ensure that borrowers should not be put through accidental foreclosure due to lapses in following proper procedures. Let’s take for example - the latest CFPB announcements.

As per industry analysts, with the appointment of new CFPB director, there could be stricter enforcement of examinations and increased oversight on:

  • Unfair debt collection practices & reporting inaccuracies
  • Impact of technology implementations on protection of borrower data
  • How servicers are communicating with borrowers & helping them opt for a suitable repayment plan 

Thus, servicers will have to walk a thin rope while performing their day to day operations.

To address these concerns, Servicing Solutions Expo has lined up four dedicated sessions on policy & compliance:

These sessions will go through the impact of the emerging regulatory landscape such as - changes to Regulation X, new CFPB guidelines, federal & state enforcements during moratoria etc.

It is expected that servicers will gain insights on how best to fine-tune servicing QC practices, borrower communication and default servicing operations to stay compliant with these regulatory requirements.

Theme 3: Leveraging technology to improve servicing operations and reduce cost of servicing

The third piece in the mortgage servicing story is about operational efficiency in the post moratorium period. The foremost operational priority is streamlining customer service and communication to provide helpful information to borrowers who exited forbearance. 

This could mean providing a mix of self-serve tools like chatbots, FAQ pages, explainer videos etc and call based service support to ensure a truly omni-channel experience for the customers. Moving down the value chain, servicers can unlock tremendous value in leveraging AI & machine learning in three areas namely:

  • Servicing call prioritization
  • Default prediction
  • Predictive modelling to offer better rates that incentivizes customer retention.

On the back-office side, mortgage servicers can leverage AI OCR to automate document collection & loan file verification during the loan boarding process. This is because when a mortgage servicer buys MSRs or bulk loans, the loan boarding team gets inundated with excess paperwork. It requires immense manual effort to go through hundreds of documents in non-standardized formats and do a ‘stare & compare’ analysis to make sure documents & data fields are in order. Unintended errors made during a manual onboarding process could result in improper application of mortgage payments, incorrect borrower contact details, delayed interest rate adjustments etc. This puts the servicing team at risk of violating CFPB guidelines & facing punitive actions. 

AI based document automation minimizes manual file set up & review, validates borrower data directly with source and produces loan files in compliance with TILA, RESPA, HMDA and other guidelines. 

To focus on how technology can help mortgage servicers improve their operations - the Servicing Solutions Expo has scheduled dedicated breakout sessions under its INNOVATION & TECHNOLOGY TRACK:


Conclusion:

With the Servicing Solutions Expo, MBA is prepared to go the whole nine yards to help mortgage servicers get set up for success in 2022. Taking industry feedback, most of the sessions are deliberative in nature & have razor sharp focus on challenges arising from the regulatory environment. For us at Vaultedge, this conference provides an opportunity to connect with our customers in person and learn about their strategic priorities for 2022. If you’re also heading for the Servicing Solution Expo, feel free to reach out to us here - we would be happy to meet you.

See you at Orlando !

Sanat Mohanty
Director, Product Marketing