Editor’s Note: This feature originally appeared in the May issue of DS News, out now.
Tim Neer serves as the SVP and Director of Loan Servicing for Colonial Savings in Fort Worth, Texas. As Director, Neer is responsible for all loan servicing operations, including the division’s purchased servicing business. Prior to Colonial Savings, Neer was a Senior Executive at Morgan Stanley where he held the position of SVP over Saxon Mortgage’s Financial Transaction Management Group. With over 35 years of experience in all facets of the mortgage business, Neer has held numerous senior leadership positions with American Home Mortgage, HomeBanc Mortgage, GE Capital Mortgage Services, and Washington Mutual. Neer is actively involved in numerous industry committees and advisory groups and currently resides in Fort Worth, Texas.
What are the trends and challenges you see as being important in 2018 for the servicing side?
Right now, the biggest challenges are the disasters that we had in Houston, in Florida, and the wildfires in California. The industry is focused on how to assist those borrowers and what is the right level of assistance to provide. How do we get them back on track to start making payments again?
Delinquencies overall are way down as well. We're pre-crisis levels, so the big challenge is how to reset our capacity to match declining delinquencies. Another big item facing us in 2018 is how to create a better self-serve experience for customers. We're in a day and age where consumers are very tech-savvy. Cell phones, text messages, email. Everybody's trying to address, what is self-serve? What level is the right level? How do we get the right mix out there but still manage our risk?
Now is the time for the industry as a whole to take a step back and figure out how to improve the overall technology platforms within our industry. The technology in the servicing space has probably lagged behind the industry and consumer needs for some years now. So, how do we get with our core servicing providers and figure out how to change the technology to be more consumer-friendly, create better productivity, and remain flexible to an ever-changing regulatory landscape, all while preparing for the future and any crisis we may incur?
What are the emergent technologies you think are poised to be useful or transformative for the industry?
The problem with most platforms today is they're not very self-providing. So, if you have an insurance policy as a consumer and you want to make a change to your policy—for example, your insurance carrier—you can't today go into our core platforms and effectively self-serve yourself. Today, you can't go into our system and make that a self-service event. The overriding factor for mortgage servicers is going to be, how do we get to an environment where if I want to go in and make a change to my insurance carrier, I can go online and provide all of that information to you and get that new carrier set up without the servicer having to get involved with it, and without me having to pick up the phone and call you to figure out what's going on.
On the question of blockchain, it really hasn't gotten into the mortgage space in a big way yet. We've talked about things like Apple Pay, Samsung Pay, and how all that will work in our payment systems, but we're a way out before we begin to see that kind of progress take effect. We're so far behind the times regarding technology in the servicing space; we're struggling with the basic things like text messaging, emails, websites that allow borrower uploads of documents to us. We are heavily regulated in several key areas. For example, with text messaging we have the Telephone Consumer Protection Act (TCPA), so how do we get consumers to consent to these activities? Consumers want it, but they have to consent for us to do it. We're still back at that basic blocking and tackling level, in my opinion, and we have to do better. We're still addressing many technology issues that are impeding our progress.
This industry as a whole is still pretty basic, and we have got to start figuring out how to modernize our industry to meet consumer needs.
Do you think that process is about trying to roll things out gradually or do pilot programs? Or is it about communicating with the consumers to figure out what is wanted?
It's both. For the most part, we know where consumers are, we know the kind of things they like. We've done enough surveys, and we understand it. The problem is, we have limitations in our platforms. The two big service providers really can't do auto-text-messaging and auto-emails today. Go to any credit card system and they will show you how it is done. The servicing platforms were not built for those types of technological advances. Historically, in this business, we have believed that we know what's best for the consumer, and so our systems have always dictated what we thought was best. We live in a different world now, where the consumers are speaking out and telling us, "No, what we think is best is X." To keep up will require a large investment in our core technology, and that's a massive undertaking.
We've built systems on old architecture and technology that are not easy to change. You can't go in and flip the switch and make something happen. We understand consumer needs to a large degree, so the question is, how do we get there? How do we build the infrastructure around that to get us to where we need to be?
I'm sure cost is a concern as well.
It is a concern, obviously, but the reality is we need to spend money to improve the industry. It will make our operations more efficient and capable of meeting consumers' needs. There's a lot of conversation right now about servicing costs. It's probably tripled over the last three years. I remember days when average servicing costs were $56 a loan, and now it's $200 a loan. The spend on technology clearly gets us more bang for the buck, but the industry is still struggling with how to pay for these advances in technology.
What are some of the things that servicers can do to prepare for that sort of constant evolution?
Every time we go into a disaster, or every time we go into a downturn in the market, it shouldn't feel like the first time we've ever done it. This last crisis, when things started to happen, delinquencies started to rise and foreclosures began to grow, we came out of the gate very poorly. We started throwing a lot of things at the problem to fix it and we simply were not prepared. It was almost like we were developing stuff on the fly. Now, we have an opportunity to step back and say, "What are all the lessons we've learned in this process?" Let's build a playbook for the future, so if these 10 things happen, we have a roadmap to be able to implement the right changes and address consumers' needs quickly to avoid confusion and turmoil.
For the servicing business, this is the time for us to take a step back, look at who we are, analyze the things that we've done, come up with a standardized playbook, look at the technology shortfalls we have, and figure out what we need to improve on for the future.
Are you taking into consideration the possibility of these natural disasters becoming more frequent and more damaging going forward?
A disaster is a disaster, right? Hurricane, fire. It doesn't matter. The way we react as an industry is the same. Somebody's going to go file a claim. FEMA's going to require certain things. No matter what the disaster is or when it occurs, we need to have a standardized process that says, when it occurs and when it's been declared, here are steps we are to take. Part of the problem is, when it happens, we all sit around and talk about it. We say, "Okay, this is what we're going to do, we're going to develop a playbook." And then ten other things come up, and we forget about it, and we don't do it. Then the next disaster hits, and we're like, "Oh yeah, we were going to build a playbook for this."
The same thing could happen and likely will happen, as history tells us, with downturns in the marketplace. This crisis was a fairly deep crisis, so the question is, what did we learn, what are we going to to do next time, and who are the leaders who will sit down now to develop the playbook to prepare us for the next time? Are we going to be prepared or are we going to get caught flat-footed again? The choice is an industry-wide decision that needs to be addressed.