If you were able to view today through the eyes of tomorrow and design the ultimate mortgage servicing organization, how would you begin?
And what would this organization eventually look like?
It is time for mortgage servicers to consider such a scenario for, during this decade - and our march into the 21st century-technological advances will continue to transform your lives and the way in which you provide services.
In the future mortgage servicers will be operating in a much different environment. But there should be no fear of the unknown. That's because the goal of technology is to empower your people to not only do a better job, but to assume positions of increased responsibility.
Consider that in the 1970s the life expectancy of a computer system was eight to 10 years. Today, the technology is outmoded in 18 months. Certainly, most organizations are not in a position to spend the considerable amount of money required to keep up with what's transpiring on the technological front. But, because it's their business, technology providers must, and what they can bring to your organization is considerable.
Mortgage lenders and loan servicers must have the latest in technology and all the efficiencies it provides. Such high-quality service prevents anything from slipping through the cracks. And, in the process, because their are fewer problems and ultimately less risk, this improves the quality and profitability of the portfolio.
So, it's not a case of considering the latest in technology - it's a situation of its absolute need. It's a situation of finding the expert technological providers with the continuing expertise to eliminate your problem areas and, always along the way, having much to do with your continuing growth for the ultimate benefit of all concerned.
Measure of Productivity
When you talk with mortgage servicers, they measure their effectiveness and productivity by the number of mortgage loans they are servicing per full-time employee. This can range from a low of 150 to a high of 800 to 900 per employee.
One area of mortgage servicing that is ripe for the use of technology to enhance productivity and accuracy is the hazard insurance area. For example, the mortgage servicer who is servicing some 300,000 loans may have 45 to 50 people in its insurance department.
A strategic - and monetary - advantage can be realized through a sophisticated technological provider entering the picture and handling the servicing, the insurance tracking, at much lower cost to the bank, compared with the more costly process of the bank paying in-house people to handle the tracking.
Also, insurance coverage can be provided to help the risk management of hazard loss exposure in the portfolio.
The benefits continue. The quality and efficiency of the provider's services helps to create satisfied customers for the mortgage servicer. The borrowers are more satisfied, there are fewer customer complaints, there are less problems, and all.this enhances the mortgage servicer's strategic advantage.
The best advertising of all - word of mouth - begins to spread on behalf of the mortgage lender and from the people who are in their debt.
The primary need of lenders and servicers is to have access to vendors of insurance products and services that protect them against losses to their mortgage, installment loans, and lease portfolios. To make sure the borrower is providing his/her own insurance coverage and that it adequately protects the lender's interest in the property.
And, if the borrower does not provide adequate and acceptable evidence, then the vendor must generate notification to the borrower identifying the deficiency with the request that proper coverage be obtained. If, after notification letters, the borrower does not obtain coverage, then it is time to force-place dwelling fire insurance on those mortgage loans.
This process involves issuing an insurance certificate under a master policy that was issued to the mortgage servicer. The master policy protects the servicer from loss due to fire and other hazard risks. So, the balance of the loan is protected, and the certificate also protects the borrower up to the last known insurance amount if it is greater than the loan balance.
The lending institution or the mortgage servicer is billed for the insurance premium, the lender adds it on the loan, then collects it with the monthly payments from the borrower.
Vetting the Policy
This all sounds fairly simple, but it isn't. It is extremely complex. At my company the insurance information comes over 800 different insurance companies. You may get as many as six different formats of documents from each of these companies.
You have to be able to interpret the policy; the cancellations, reinstatements, endorsements. You must understand the coverages provided and the limits and make absolutely and positively certain the carrier's Best's rating is adequate; that it is an acceptable carrier.
Further, you have to be able to find the loan that pertains to the particular insurance document. Often, the insurance will be in one name and the loan may be in another name. An insurance policy may insure from one to hundreds of property locations. You have to make sure you find them all and that you update the information constantly.
If the insurance document that comes in is a request for premium payment and the loan is set up as an impound loan, then it is necessary to process the document and make the insurance payment to the carrier.
You have to be able to look at a policy and interpret all the endorsement codes on the front of the policy to know whether it is providing replacement coverage.
Mortgage loan servicers send us information from their loan data base so that we can maintain a record on each loan. The data furnished is considerable and it includes information such as the borrower's name, the property mailing address, the type of dwelling, the loan balance and myriad other information from which we build a data base.
As the insurance documents are received, we capture information from those insurance documents and match it to the correct loan, then update that insurance information into our system reflecting the valid evidence of insurance coverage.
Imaging technology is used to scan insurance documents and send an electronic image from one work station to the next until it has been processed by all who must be in the loop.
It is apparent that the non-blinking eye of the sophisticated technological provider and servicer must be constantly focused on providing solutions for both today and tomorrow. Solutions which address insurance information management and tracking for mortgage and auto lenders; flood insurance solicitation, placement and tracking for voluntary and force order coverages; property tax services; sophisticated imaging and work management technology.