The heightened regulatory environment for mortgage servicers is changing the way executives' performance is evaluated.
Once, the heads of servicing divisions were measured against various budget-related goals. Compliance is now the primary metric.
"My entire incentive program is based on compliance and delivering on technology and not on budget at all," said Kim Yowell, senior vice president and servicing manager at BOK Financial, of Tulsa, Okla. "That's very different than the way it was in the past."
The $29 billion-asset depository services a $17 billion portfolio consisting of 125,000 loans. Its servicing costs increased 43% from 2013 to 2014, and are expected to increase an additional 12% year-over-year in 2015, Yowell said during a panel at the Mortgage Bankers Association's Servicing Conference, ongoing this week in Dallas.
The biggest expenses are related to technology upgrades and adding employees, she said. BOK Financial is in the midst of upgrading document imaging, telephony and other servicing technology.
"We basically have an Excel spreadsheet that we call our decisioning tool," Yowell said. Meanwhile, the institution's mortgage origination unit is implementing a new origination system, and that will involve additional integration work.
"It's all about catching up and playing catch up with technology," she said.
Servicers are finding the best way to improve efficiency is through upgrading and adding new technology, with a particular focus on paperless technologies that improve the customer experience as well as compliance obligations.
"Some of the issues that the servicing industry has faced have been not seeing the business through the customers' eyes and not making the investments to make the experience the best for the customers," said Mike Weinbach, senior vice president and head of servicing at JPMorgan Chase.
"You have to get the compliance part right because if you don't, it's going to be the most expensive thing you do," he added.
Efficient regulatory compliance is a challenge even for new servicers with portfolios of high-performing loans. Servicing revenue per loan is essentially fixed, but "high levels of customer service come with a cost and customer service levels have to be top-notch," said Scott Mesenbrink, senior vice president of finance at Roundpoint Mortgage Servicing, an independent, nonbank servicer founded in 2010.
Roundpoint is attacking the problem by adding scale, and the servicer has put particular emphasis on its onboarding process for loan transfers.
"A lot of balls can get dropped in the loan transfer process," but "if you can eliminate that or minimize that, you start off on the right foot with the customer," Mesenbrink said.
Another area of focus is using interactive voice-response, or IVR, systems, along with consumer-facing Web tools to enable better self-service functionality.
"Enhancing the IVR can get the customer to where they need to go with little to no effort," he said.
In addition, servicers must learn from their mistakes and foster communication between the various siloed divisions of an operation. Citizens Financial has done this by emphasizing to employees that they should be proactive about bringing potential problems to management's attention.
"It is not punishment if you put your hand up and say, 'I think this is broken,'" said Melanie Reid, president and head of mortgage and equity servicing at the bank.
Employees who handle error resolution and address compensatory fees are also now expected to follow-up with other departments and explain when fines and penalties are assessed.
Previously, "the data was available, but it wasn't going anywhere," she said. Now, "we're trying to pull those silos and have them share that wealth of information to identify root causes."