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The ‘Three Cs’ of a Balanced Mortgage Servicing Industry

Editor’s note: This feature originally appeared in the February issue of DS News

Gagan Sharma acquired BSI Financial Services from a bank in 2006. Prior to BSI, Sharma founded a global outsourcing company serving the financial services and technology industries. He raised institutional equity financing and increased the company’s labor force to more than 1,200 people before selling it. Before that, Sharma was a consultant with Deloitte, advising clients on matters of strategy and operations in the financial services and high-tech industries. He was recently a finalist in the EY Entrepreneur of the Year for the Southwest Region. Sharma has an MBA from the Wharton School at the University of Pennsylvania and a B Tech from the Indian Institute of Technology, Delhi. 

While speaking with DS News, Sharma said that embracing innovation in 2020 will require learning critical lessons from 2019 and knowing how to grow amidst the ongoing low default environment. 

An industry expert on technology within mortgage servicing, Sharma spoke with DS News about his “Three C’s” of balancing servicing, and how his company is utilizing the latest digital tech to improve.


What are the key challenges facing lenders and servicers, and how do you see them changing this year? 

As a servicer, you have the “Three Cs.” There is the customer experience, there is compliance, and there is cost. It was probably true 30 years ago, and it’ll be true 30 years from now as well. Servicers have to look at all of those things. 

From there, then you get more into questions such as, “What is the economy doing, and what does that do to us as servicers?” Similar things can be said about the lending segment. What are the things that impact the performance of the portfolio? Rates have a huge impact. Natural disasters have a huge impact. Credit quality has a huge impact. Those are three things that jump up to the top of my mind. Depending on where we are in the economic cycle, what may be happening to the economy, those three things—or natural disasters, we can’t forecast those.


How can servicers control and mitigate costs? 

Servicing is effectively the manufacturing part of the business, so there are lessons that can be taken away from the manufacturing business. 

We can look at the manufacturers who’ve been doing it for over 100 years and ask, “What lessons can be learned?” There are three key things that every servicer should be thinking about. 

One is the whole category of digital. A second is what I call “lean manufacturing.” How can we bring lean manufacturing process philosophy into servicing? Finally, servicers need to look at the global delivery model. Every manufacturer in every other industry uses a global delivery model. Every service company has to use the global delivery model.

One of the things that we feel particularly proud of at BSI is our view that servicing is effectively what I call a “needle in a haystack” problem. If you service 100,000 loans, you know that most of your risk lies in the 20 or 50 loans where something wrong may have happened. 

Most servicers are running at a level of quality where 99% of the loans are working just fine. It is the last 1% that causes issues. What we have spent a lot of time, effort, and money on is in using technology to identify those high-risk assets and then put corrective measures in place. If somebody or some process made a mistake on the loan, if we look at the data on the loan, we should be able to identify a large number of exceptions, whether that is in the escrow process, the loan-boarding process, or the default process—everywhere in the process. It’s just about making the best use of the data you have.

“Servicing is effectively what I call a ‘needle in a haystack’ problem. If you service 100,000 loans, you know that most of your risk lies in the 20 or 50 loans where something wrong may have happened. Most servicers are running at a level of quality where 99% of the loans are working just fine. It is the last 1% that causes issues.”


Is it harder to drive innovation on the servicing side of the industry? 

Innovation is to a company what eating healthy and doing exercise is to a human being. You always need to eat healthy and do exercise. A doctor may say, when somebody is really sick, “There’s an emergency reason to do it.” But for the long-term health of the person, they always have to eat healthy and exercise. 

I would argue that the same thing applies to innovation within companies. We always need to be innovating. Instead, it becomes a question of, in what area should they focus their efforts? As a company, we’ve said, the customer experience is becoming much more digital and mobile. We’ve made the determination as a company that we need to focus on the customer experience, and so we over-invested in technology in order to build those proprietary tools. 

A decent chunk of our businesses is made up of multiple-property investors. We are actually one of the largest servicers in the industry of that product. So as far as the mobile technology in all this, the one portal, what are the needs of your customer base? How do those change when you’re talking about the investor side of things as opposed to the needs of a typical homebuyer? 

In the traditional homebuyer case, many consumers want to put their mortgage on autopilot. In the investor case, they’re taking new loans because they may buy a new property; then they may rent it out, or they may want to fix it and sell it and then they buy another new property. So that tends to be much more high-touch. 

The investor loan product is also high touch, but it is high-touch in a different way. Historically, the industry has defined hightouch to mean default, but high-touch doesn’t have to mean default. High-touch really just means the customer wants to talk to us.


How does technology make things easier when a borrower is approaching default? 

Consumers can apply for loss mitigation online, and they can check the status of their loss mitigation online via a mobile app. Intuitively, that feels like that should make it easier. However, we are a very data-driven organization, and right now, we don’t have the data to prove that intuition as yet. But intuitively, if I’m making it easier, I’m making the conversation easier for the consumer. They can check the status whenever they want. 

How do you make the process more frictionless? We are making it easier for the consumer to interact with us to pay their mortgage.

About Author: Mike Albanese

Mike Albanese is a reporter for DS News and MReport. He is a University of Alabama graduate with a degree in journalism and a minor in communications. He has worked for publications—both print and online—covering numerous beats. A Connecticut native, Albanese currently resides in Lewisville.

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