It’s clear that the industry is continuing to place laser-like focus on improving and controlling the borrower experience when servicing loans. Great strides have been made towards this end, but it’s a mindset that needs to be at the core of every decision point along the way.
Every decision should start with the question, “How does this impact the borrower experience?” From there, some of the questions you should ask yourself include:
- Where are my communication touch points with a borrower?
- How do I better control the borrower experience?
- Are my borrower communications consistent and compliant?
- Do I have controls in place over borrower communication templates?
- How flexible and scalable is my technology when defaults increase, portfolio sizes grow, or new regulatory requirements need to be implemented?
- How do I prevent borrower complaints?
- How do I make the loss-mitigation process more efficient?
Customer communications: the core of the customer experience
A large part of the focus on the borrower experience starts and ends with customer communications. It’s important that servicers have consistent and compliant borrower communications, and that they identify borrower touch points. Servicers want cleaner, more consistent and borrower-friendly letters, while also ensuring they are compliant.
In addition to monitoring for regulatory changes, servicers must analyze regulatory, procedural and product changes and operationalize them within systems, processes, training and documents. All of these operational components place a strain on resources and increase costs. Letters that go hand in hand with a process need to be delivered in a standard, uniform, and compliant manner. From a document perspective, the internal process to incorporate changes is often not efficient or timely.
Forward-looking servicers are seeking solutions that are flexible and allow them to address and comply with frequently changing regulatory requirements seamlessly and proactively. Technology that can be used to create, manage, test and deploy documents improve servicer efficiencies.
Regulatory requirements and implementation timelines
Regulatory and investor loss mitigation program changes can often have short implementation timelines and place strain on resources to meet mandatory effective dates. When notifications are issued, servicers begin the time- and resource-consumptive task of interpreting them and implementing or changing processes as needed. Success in this arena requires staying on top of federal, investor/insurer, and state compliance requirements.
Change happens fast: Be positioned for a rapid response
In 2017 alone, we saw Fannie Mae and Freddie Mac issue the new Flex Modification program, several new disaster relief programs, and the release of the Veterans Affairs Affordable Modification program. On February 22, 2018, the FHA announced a new loss mitigation program: the Disaster Standalone Partial Claim. This mandatory program requires new documents and procedures. Fewer than 70 days were provided to implement the program. Similarly, on March 7, 2018 the USDA announced via email, that Chapter 18, HB-1-3555 would be updated with a publication and effective date of May 1, 2018. Servicers had less than two months to review and implement 67 pages of new loss mitigation requirements, including new procedures and documents. On September 19, 2018 Fannie Mae and Freddie Mac announced a significant re-write of their model evaluation clauses, impacting over 14 separate documents. Additionally, California revised its Homeowners Bill of Rights requiring new documents and procedures for loss mitigation and foreclosure. Both California and the GSEs all chose January 1st 2019 as the mandatory compliance date for their document overhauls, significantly taxing mortgage servicer compliance and technical staff.
With major hurricanes and wildfires in 2017 and 2018, disaster relief programs were a key touch point with borrowers. Government agencies and investors were quick to act, implementing improved disaster relief options for impacted borrowers. However, there are always opportunities to become more proactive to educate borrowers in advance of a natural disaster. By leveraging data, servicers can improve the borrower experience through communications that educate and help borrowers prepare— prior to being impacted by one of these life-changing events. By thinking outside the box and being proactive, servicers can become a champion for the borrower, which in turn can only help build trust and increase customer satisfaction.
Eliminate paper from the workflow and streamline loss mitigation
As it pertains to consistency in communications for loss mitigation, the ability to make loan modification programs less paper-intensive and clearer is an area that improves the borrower experience. With the sunset of the Home Affordable Modification Program (HAMP) and implementation of the Fannie/Freddie Flex Modification program, we have seen a positive shift in that direction.
Fannie Mae combined the features of the Fannie Mae Home Affordable Modification Program (HAMP), Standard Modification, and Streamlined Modification into the Fannie Mae Flex Modification program. The goal was to offer servicers an easier, flexible way of helping more borrowers qualify for a loan modification in a changing housing environment. HAMP has allowed for a more streamlined and synchronized approach for GSE loan modification, with fewer documents required to complete the application process.
While the implementation of the Flex Modification program was well received by the industry, there’s still a need for a more standard and streamlined approach to loss mitigation programs outside of the GSE efforts. FHA servicing requirements are still challenging for servicers to execute. The requirements are complex and labor-intensive for servicers and borrowers alike. A similar collaborative approach to the implementation of the Flex Modification program would be a significant step towards improving the borrower experience through increased home retention for FHA borrowers.
Maintaining controlled, clear, consistent and compliant documents
Across servicing, it’s not uncommon for servicers to maintain document compliance by supporting hundreds to thousands of letter templates. Maintaining this number of templates—while also ensuring they are controlled, consistent and compliant—is a daunting task. Core servicing platforms have limitations and deficiencies that can make implementing letters difficult. For a large servicer that has a servicing footprint in multiple states, the complexity can become overwhelming.
Today’s complex regulatory environment demands a new way of managing document compliance. Dynamic document generation creates a better experience for borrowers. By leveraging plain language drafting styles, dynamic document generation make documents easier to read and allows for custom tailoring to the transaction, while maintaining compliance that is more critical than ever.
While there have been advances in servicing technology since the 2008 mortgage crisis, many servicers still use a myriad array of solutions pieced together to manage the borrower communications process. The end result leads to manual processes, significant overhead, and a solution that isn’t scalable when defaults increase or portfolio sizes grow. All of these outcomes negatively impact the borrower experience.
Maintaining compliance with complex loss mitigation and foreclosure processes is critical for servicers—both from a risk as well as borrower experience standpoint. In today’s regulatory environment, servicers are held to much higher standards relating to these critical borrower touch points. While delinquencies and defaults have receded to pre-housing crisis levels, the risk of non-compliance has not. The ability to leverage and implement flexible and scalable solutions to manage processes is critical. Delinquencies and defaults are cyclical in nature. If servicers haven’t done so, now is the time to prepare before one’s delinquencies and defaults increase.
Delivering documents electronically: digital solutions are on the rise
Looking to streamline the delivery and execution of servicing documents, servicers are increasingly looking to adopt digital solutions to electronically route, execute and store servicing documents. In today’s age, adopting e-delivery solutions in combination with a borrower self-service portal can drastically improve the borrower experience. Servicers continue to look to leverage these capabilities for loss mitigation and disaster relief programs to reduce timelines, streamline processes, and reduce costs. Through borrower self-service portals, the industry is empowering the borrower, which ultimately improves the borrower experience for those facing financial hardship.
Finding a solution: focus on customer and current requirements
As the industry continues to look to improve the borrower experience through e-delivery technology solutions, consideration must be made to ensure one is aligned with any compliance requirements that may dictate how notices must be delivered to borrowers. As more states continue to adopt electronic notary capabilities, servicers will have the opportunity to leverage e-sign capabilities to improve the loan modification experience.
The MISMO Remote Online Notary (RON) Development Workgroup recently completed their task to draft Standards for Remote Online Notarization and MISMO will soon publish this new standard for public comment. Mortgage Bankers Association (MBA), American Land Title Association (ALTA), National Association of Secretaries of State (NASS), and Uniform Law Commission (ULC) have all been actively working on this topic to move the discussion forward. As of February 2019, ten states have enacted legislation specifically authorizing RON as an acceptable method of notarization, eleven more states are actively considering similar legislation, and finally two other states are studying RON to assess whether they would consider legislation to authorize it.
As a result, when looking for the right solution, make sure it’s for the long run, with one eye toward accounting for an evolving regulatory environment, and another toward making sure your processes continue to be friendly from a borrower experience standpoint.