Clarifire Conversations

Mortgage servicers gathered in Orlando for the annual MBA Servicing Solutions Conference & Expo to explore insights on what to expect in 2024. A compelling session, “Executives Discuss Their Challenges, Goals”, revealed a consistent need and desire to focus on reimagining servicing. Whether servicers are struggling under the pressures of customer call volume, Basel III and capital requirements, Mortgage Servicing Rights and warehouse line risk, or the cost to embrace current technology, the answer from executives was the same… take a pause from the disruption and redirect your efforts toward analytical tools, workflow automation as a no-code solution, as well as seriously looking at your processes with a fresh perspective. Think about working differently with your process complexities automated and organizational silos eliminated. Let technology do the heavy lifting while your teams focus on critical customer interactions.

Are you thinking it's time to reexamine your approach to technology innovation? Stop waiting, now is the time to implement change capabilities into your mortgage servicing operation. Don’t you want it all? In today’s fast-paced mortgage environment where servicers remain under immense pressure to streamline processes, cut costs, enhance customer engagement, and move nimbly all at that same time, some servicers are still building their own software and struggling to keep up. We’ve heard this many time before, yet still revert to manual processes and added labor when under pressure, an approach that is simply no longer sustainable in this dynamic servicing ecosystem. To thrive and compete in the mortgage industry, servicers need to automate change with smart logic that leverages modern process components accessible throughout your organization and accelerates trusted, proven innovation.

The impact of the COVID-19 pandemic on mortgage servicers and homeowners is not over. As agencies and industry stakeholders evaluate the residual effect on homeowners, the question becomes, did the industry help them, and where could we have done a better job? The Mortgage Bankers Association (MBA) recently defended the efforts of mortgage servicers in response to concerns published by the U.S. Department of Housing and Urban Development (HUD) Office of the Inspector General (OIG). The MBA highlights how mortgage servicers were diligent in their efforts to help struggling homeowners, pointing to the numerous program changes and scaling to address record-breaking volume as underlying obstacles for servicers throughout the pandemic. However, during this period of lookback, it becomes clear that despite best efforts, servicers need to ensure readiness for future industry disruption, whether it comes from natural disaster, pandemic reverberation, economic calamity, or other sources. Are you ready? 

In today’s technologically advanced world, artificial intelligence is rapidly evolving and emerging through the modernization and adoption of advances in business process automation. The opportunities and availability are expanding exponentially, with questions around readiness simultaneously compounding. The incorporation of AI promises to significantly reduce workload, but how and where do you manage the introduction of these capabilities into existing operational and systems infrastructure? As you can imagine, the actual adoption of AI can be quite complex and, in a worst-case scenario, can create layered risk.

The Consumer Financial Protection Bureau’s updated mortgage servicing examination procedures pull from lessons learned since their last update in 2016, with a strong emphasis on exam findings from the COVID-19 pandemic. For mortgage servicers, new agency procedures can be daunting. The updates published on January 18, 2023, were issued as a resource and have been incorporated into the CFPB’s 1,812-page Supervision and Examination Manual. This is the manual that CFPB examiners will refer to during their next visit to your office. Understanding these changes and their impact is paramount. No pressure, but these updates need to be identified and incorporated into your processes to ensure your next CFPB exam goes well. Clarifire is here to help you explore some of the latest changes outlined by the CFPB and, more importantly, help you incorporate updates into your operational business processes.

Or are you stuck by the side of the road as others pass by? It’s time to stop doing the same thing… and getting the same results. The obstacles that face mortgage servicers continue to ebb and flow into 2023 with rising interest rates, increasing MSR sales, and worries of delinquency as inflation and unemployment numbers climb. Servicers can expect to grapple with the onslaught of last year’s originations, tackling loss mitigation as lack of affordability meets recession, including impaired working capital and profitability. Although dealing with a roller coaster of hurdles is not new for mortgage servicing, how we overcome obstacles is different. The question remains, are you stuck in the past?

What’s next on the mortgage horizon? Lenders are feeling the pinch as interest rates make an uphill trek. On a broader scale, foreclosure activity has now surpassed pre-pandemic levels and continues to inch upward as average home equity has reached a record high. This is not doom and gloom, but certainly signals transformation is soon to come. Preparing for this next influx of change is going to be a challenge, especially for servicers, who will be impacted by cost-cutting measures as rising interest rates begin to affect the entire mortgage operation.

Not all servicers are alike, whether it’s size, portfolio composition, delinquency rates, or other criteria. Despite these disparities, the CFPB is determined to prioritize their oversight of mortgage servicers in an ongoing effort to identify and minimize risk for borrowers. Based on reported data and complaints, they’ve placed a strong emphasis on proper management of forbearance exits and the loss mitigation process. Their most recent response metrics report highlights the CFPB’s responsiveness through efforts to issue rulings, temporary safeguards, joint agency statements, and tightened enforcement. The endgame is to ensure industry servicers are appropriately responsive to homeowners, especially looking back on the pandemic and the ongoing recovery.

The latest numbers reported by the Mortgage Bankers Association illustrate the volatility that remains in forbearance volume for servicers. As of December 31, 2021, an estimated 705,000 homeowners were in forbearance plans. This number increased in January as the number of new forbearance plans hit a three-month high. However, this trend appears to have reversed itself as the overall number of forbearance plans continues to decrease along with borrowers exiting plans. Of the borrowers remaining in forbearance, 63.1 percent are currently in an extension phase. Now the concern becomes how difficult will it be to transition these remaining borrowers to reinstatement or other permanent workout solution.

Exhausted by change? Every company, mortgage-based or otherwise, is experiencing a shift in automation as an essential part of business. The timing of this shift, however, may seem untenable as the industry experiences record levels of activity on every front. New point solutions, applications, and big-box add-ons are being introduced into the market at a relentless pace. Each one promises to deliver a groundbreaking experience that is better, faster, and more efficient. The reality is that you often wind up managing too many applications, too many one-offs, too many upgrades, and still wind up with too many manual handoffs and too much risk. It’s time to change up the approach and find an answer to the chaos.