Authored by Timothy Kosiek, Kristen Jolaoso and Andrew Litwin
The 2018 Mortgage Bankers Association’s (MBA) National Mortgage Servicing Conference and Expo brought together nearly 2,000 residential mortgage loan servicers and vendors to discuss important matters within the mortgage servicing industry. There was a notably reduced focus on the regulatory influence upon mortgage servicers, including minimal mention of the Consumer Financial Protection Bureau (CFPB) likely arising from recent changes in the office’s leadership. Natural disaster recovery efforts and the need for the mortgage servicing industry to embrace FinTech (financial technology) were focal points of the conference.
Weather-related disaster relief
In a panel discussion, representatives from the U.S. Department of Veterans Affairs (VA), U.S. Department of Housing and Urban Development (HUD), Freddie Mac, Quicken Loans, Ginnie Mae and USDA Rural Development spoke on a panel about natural disaster initiatives and policies, including efforts to assist both homeowners and servicers. As investor relief options, such as suspension of foreclosures, expire and borrowers begin to recover from disasters, the panelists discussed ways in which they have focused on helping borrowers which in turn helps servicers.
Through communication between the servicers and investors as well as visits to the disaster areas, the servicers and investors acknowledged that collaboration helped to minimize losses to all involved. The frequency and size of recent disasters was unprecedented and thus, some of the panelists noted that the proper level of coordination did not happen as quickly as it probably should have. However, all panelists noted that these disasters provided a great learning opportunity for the organizations to be better prepared for the next time disaster strikes.
One of the lessons learned was that not all types of disaster losses were insurable. Investors worked with the servicers to help borrowers identify insurable losses and where those losses were not insurable, the servicers assisted borrowers with filing for disaster assistance from the Federal Emergency Management Agency (FEMA). Communication with the borrower was critical in all stages of the recovery efforts and thus the servicers were encouraged to monitor all communication through accurate and timely documentation in their systems.
Best practices for servicers are the inclusion of disaster response policies, procedures and job aids in the Compliance Management System (CMS). The CMS should include documentation of communications with the borrowers to support compliance with fair servicing requirements. The CMS should also adequately track legal requirements for flood insurance. Servicers should also consider analyzing their portfolio for flood risk concentrations and offering loans to address flooding issues in the home.
Technology has been evolving at an extraordinary rate. While other segments of the financial services industry have embraced FinTech to increase efficiencies and bring additional value to their customers, the mortgage servicing industry has lagged in adopting current innovative technologies. A number of presenters at the conference discussed uses of technology to improve the borrower experience will produce the greatest results. Several presenters discussed the need to communicate with the borrower in the form they desire. While some consumers still prefer mailed copies, many consumers would prefer these copies electronically via email or text message. The presenters also discussed the need to develop mobile applications so a borrower can perform daily maintenance on loan accounts. New innovations discussed the use of artificial intelligence and smart home devices to be able to access account information and pay loan balances, as well as the possibilities of blockchain in the servicing space. Some presenters did note that the development of these technologies is costly and therefore partnering with startups early on or waiting for proven technologies to emerge is the most prudent approach.
The primary message this year, which will likely be a theme in other 2018 conferences and related publications, is to be prepared for the unexpected and embrace technology.
For more information on these topics, or to learn how Baker Tilly's mortgage servicing industry specialists can help, contact our team.