Posted by Chris Guidici | Director | Opus CMC | Date: 4 Dec 2015
The mortgage world is a tangled web of interrelated businesses; Originators, Appraisers, Auditors, Investors, Regulators and the like. But perhaps no entity is as distinct as the Servicer. Obviously, they have one of the most lasting and impactful roles in the industry: the practice of accurately servicing home loans. And for better or worse, no two servicers are alike. As with most other mortgage businesses, the servicing world has gotten increasingly complex. But with proper oversight and an objective assessment of a servicing operation, complexity can be managed and the associated risks can be mitigated. It starts with asking the right questions.
How do you measure success? What are the metrics the servicer is using to determine the effective management of a portfolio? Do these align with your business's goals? Developing clear objectives and establishing the appropriate benchmarks is necessary. You'll also need access to the tools to periodically measure the performance of your partner.
What are the operational risks? Every organization has them. The key is in their timely identification and management. And not all segments of servicing carry the same risk. High risk items including default management, collections, loss mitigation and asset management require particular attention. And while the industry has undergone a strategic shift focusing on borrower outcomes, servicers need to balance this shift without compromising other aspects of servicing, including data integrity.
How do you manage change? Regulations such as BASEL III and Dodd-Frank/CFPB have created a new rules and added scrutiny. You need to know that your servicing partner has successfully adapted. Perhaps even more important than whether or not the servicer has adapted, is the servicer's ability to adapt going forward. Regulatory winds shift, business objectives are modified and the business cycle continues to turn. Having faith in servicing business practices means knowing they have the right monitoring mechanisms to keep the pulse of the industry and the operational fluidity to evolve along with it.
Periodic operational assessments of servicing practices have become a business necessity. Establishing the goals and criteria for success, identifying and managing risk factors, and developing the capacity to evolve along with the industry will lead to one value transcendent in the mortgage business; confidence.