This past September, the Five Star Conference & Expo returned to the Hyatt Regency in Dallas, Texas, for an in-person event. The DS News team was on-site, speaking with mortgage servicing’s best and brightest to learn about the state of the industry from their perspective. Here, we bring you some highlights from those conversations.
Bryce Fendall, VP, Default, Foreclosure, Bankruptcy, REO, Claims
What can the industry do to assist struggling homeowners as they exit forbearance plans?
For all mortgage servicers, that has been our focus for the last year-and-a-half: making contact with customers. There’s a kind of phenomenon taking place. When a borrower defaults, they quit reading their mail. They know they owe the bank money, and they know what that letter is, so they quit reading the mail. We are sending them their options. We have learned to become creative to get them to open the mail. We have a lot of tricks that we use, including sending them overnight mail, sending boxes in oblong shapes. We have one mailer where we put dice inside of it, and it says, “Don’t roll the dice, because you know we’re here to help.” We, as servicers, must continue to find interesting ways to connect with the homeowner. It’s not that we’re not there to help them; they are often not receptive to the help we offer. They know they owe the debt, and they think that’s the only thing we want. We only make money when the loans are performing, and when the loans aren’t performing, it gets very costly for everybody involved.
Do you anticipate a significant increase in REO activity?
We are seeing an increase in foreclosure activity already. However, we also see an increase in resolutions. We send the notice that we’re going to put the home in foreclosure unless a payment is made by a particular date, that date passes, and the loan goes into foreclosure. Sometimes, it comes to just that point where the borrower realizes, “Oh, I need to do something!” Right now, borrowers have many options, and many of them have equity. What we are seeing a lot of is getting the home into foreclosure, and then we get a notice or request for a payoff. They want to know how much they owe so that they can pay it off. Then, they pay it off or have worked out some other arrangements. I see our foreclosure volume increasing, but I don’t know how many of those foreclosures will make it to the end. It’s not going to be like what we experienced 10-15 years ago. We are still processing loans that were delinquent before the pandemic started; essentially, all of those were on hold. We can now begin to move those forward, so we’re starting to see those sales. That is what will start happening first. We don’t know what kind of volume we will be looking at. It’s too soon to tell.
Gagan Sharma, President and CEO
What are the primary challenges heading into 2022 for servicers?
Some elements are familiar from the past; some are more related to asking ourselves, how do you deliver an outstanding consumer experience? That is important. The economy is normalizing. There is guidance coming out on what does one do with the CARES Act—how does one handle someone coming out of forbearances, and so on. The third thing that I always think about is reading about these natural disasters like hurricanes and fires—things that seem to be happening more often than they used to. For a servicer, being prepared for more of that and being able to support and help consumers through that process is essential.
Do you think the servicing industry lags behind other sectors when it comes to technological innovation? If so, why?
If I continue to think of those three buckets I mentioned, consumer experience is upfront and center. As individuals, we are all used to getting a different type of consumer experience. It’s modern; it’s digital. People expect to interact with the companies they do business with in a very digital-first way. That’s an area that we are focusing on a lot. Historically, the servicing industry has been a very operations-focused business: I have to send out this many payments, send this many bills. With the changes in technology, consumer experience becomes more important. The core operating platforms have significant importance and a significant role to play. But really, what we want to be thinking about is the consumer experience and continuing on that path. Consumers want digital when they want it. But then they also need access to people when they need them. So, how do we get the consumers what they want, as fast as they want? I believe technology is the only way to do it. Companies and other industries have shown us that it can be done. Even in our business, compared to how we operated eight or 10 years ago, things are different and will continue to evolve. There is a lot of activity happening on what I would call the internal workings, the internal workflow, and there’s a lot of activity that still needs to occur on the consumer-facing side.
Jeffrey Tesch, CEO
What are the most significant issues facing the single-family rental sector heading into 2022?
The biggest problem right now is inventory. Now, I know it’s been talked to death by so many different factions in the United States, but investors from all corners of the United States are aggregating single-family homes to build options for families.
Not everybody wants to hope to own a home, but the surveys show most people would love to live in one. So, investors are aggregating them all over the country, and they’re having a tough time building out those portfolios because there’s just no inventory. As a result, investors are turning from aggregating existing single-family structures to building homes for rent instead.
For investors considering entering the single-family rental environment, build-torent or otherwise, what are the main factors they need to consider?
Newbies just coming into the space, the first thing they want to do is make sure that they have a plan for property management—it’s by far the most important thing they do. We encourage investors to use property managers from day one because most people are distracted by whatever they do for a living. Most people, especially new investors, are not saying, “Okay, I quit my job. Now I’m a real estate investor, and that’s all I’m going to do.” That is not how it works now. Usually, people are continuing their W2 job, and they’re saying, “I’m going to start here and buy 1, 2, 3 [properties].” What ends up happening is, the distractions of managing a property are many. It’s essential to have that experienced management in place and use them to help build your portfolio.
John Vella, CRO
What are some of the primary headwinds facing mortgage servicers as we approach 2022?
Much of what 2022 is going to bring are changes in the regulatory environment. As a result, managing the compliance aspect of your business will be very challenging moving forward—making sure that you’re keeping up with all the state and local rules and regulations.
The most challenging part will be how do you manage your staff during this time of change? How do you navigate the constant training that will need to be done? Managing turnover, and the transition of working from home and going back into the office, will be very difficult. Over the next year or so, the need for customer contact will become vital. Everyone’s going to want answers coming out of forbearance plans. Continuity, call center activity, and offering customers loss mitigation will be critical. Managing all the new rules and regulations around how you contact borrowers will be challenging.
What are some of the essential lessons you have taken away from what we faced over the past 18 months? Is there anything you would have done differently?
In hindsight, people were more prepared than you would have thought. The ability for the industry to react so quickly to the pandemic and rally around the client and borrower issues was tremendous. What we have learned is that we are in a resilient industry. We are utilizing past experiences that have helped, such as our experience with past disasters. The past crises helped everyone become more prepared for this unknown. It was amazing to see the ability of the industry to rally around the current situation, perform, and keep the borrowers at the forefront.
James Vinci, CTO
What are the primary things servicers need to do in preparation for ongoing forbearance exits and potential increased delinquencies?
I am focused on user experience, configurability, and scalability. Our core systems need to be ready to, not only seamlessly handle any volume spikes, but also enable our end-users to proactively address portfolio changes with as much configuration as possible. It is imperative that we adapt in real-time to the changing landscape. Things like letter changes and workout waterfalls need to be configurable, self-testing, and efficient.
I am also highly focused on contact center modernization. We are focusing a lot of attention on improving our borrower’s journey. We want to ensure that all customers have a world-class experience when they interact with us. This starts with fanatical attention to the servicing transfer experience and carries across all interactions regardless of the communication channel. Providing your customers with simple heterogeneous approaches based on their preferences is a key to that journey. If a customer needs a current statement, it should be as easy as asking Alexa/SIRI to get it for you. We’re also looking at sentiment analysis inside the IVR (interactive voice response). We need to know upfront that “Jamie’s not happy,” and route him immediately to a specialty representative trained specifically to handle more challenging interactions.
What are some of the primary obstacles in the way of figuring out those solutions and implementing them?
I think of it in three parts, do you have: 1) the required technology stack in place; 2) the right team in place (both technically and SME); and 3) the right strategic partnerships. We recently decided to modernize our in-house technology applications and infrastructure my moving to the Microsoft Azure Cloud. This provides us with instant scalability, and a modern technology engineering stack with which to build the robust applications our business partners require. As a part of that effort, we placed a lot of emphasis on training to ensure that the team could successfully manage and utilize the technology. As a result, we’re now designing, building, and deploying modern cloud-based applications utilizing best-in-breed tools and methodologies and are better able to meet the advancing needs of our business partners.
For servicing shops that are looking to modernize and make similar upgrades beyond their legacy infrastructure, how do you recommend they begin?
In my opinion, everything starts with assessing, acknowledging, and mitigating risk. It is imperative that you understand not only how much risk you’re taking on, but what your true appetite for risk is. Given the potential borrower impacts and regulatory headline risk, it is critical to place an emphasis on planning, risk assessment, and mitigation activities. Approach solutions with smaller pilots to help isolate risks and to identify any opportunities for improvement. Then, once proven, rollout with an emphasis on strong change management principles to ensure the team is trained and ready to go. Start small, think about what small victories you can accomplish, and go from there.
Michael Waldron, General Counsel and Chief Compliance Officer
Community Loan Servicing, LLC
What are the primary headwinds facing the servicing industry as we head into 2022?
The fact of the matter is, they’re essentially the headwinds that we’ve been faced with before. We are hyper-focused on ensuring our customers have the best experience they can have under very challenging circumstances. For the last 18 months, we have been focused on solutions and working with both federal and state regulators and the legislature to devise scalable and manageable plans for impacted customers. Now, it’s about continuing to execute—taking those on forbearance plans, or who were impacted by the pandemic, and helping them transition to post-forbearance options and hopefully return to some higher degree of normalcy. We’re still doing all the other things that we were doing as servicers even before as well. We simply have more on our plates. It’s about having the ability to make sure that we continue to block and tackle, but also, implement and execute the programs associated with the pandemic and helping those customers who are in greatest need.
What lessons have you learned over the past 18 months, and what would you have done differently?
I think the primary lesson is how important it has been for us as an industry to come together. We were able to draw upon shared experiences and come at this one stronger as an industry. We have benefited from technological advancements, so we were able to focus on self-servicing options, which have been critical to the success of servicers through this pandemic. The last crisis humbled us, and that has caused us to understand the importance of customer experience and better understand the value of working together as an industry with our regulators and our legislators.
We need to go about problem-solving, not in silos, but collectively. That’s where we have executed incredibly well. It’s about making sure that we continue to understand the impact of the pandemic on our employees. It’s also about making sure that we collectively recognize that the voice of the servicer is the voice that we need customers to respond to.
Ramie Word, SVP, Customer Care & Client Delivery
What do you think are the most important things for the industry to focus on as homeowners exiting forbearance and moratoria may be struggling financially to keep up?
The most important thing in the industry right now is communication between borrowers and servicers through borrower education. As forbearance winds down and the foreclosure moratoriums expire, servicers have a responsibility to help homeowners navigate mortgage reinstatement or help them find solutions to successfully exit forbearance and avoid foreclosure. Servicers need to make sure they are helping set homeowners up for a successful exit out of forbearance by helping them understand all of their available options, whether it’s selling their home or something else. When the pandemic started, we focused heavily on education, but it’s even more critical now as homeowners have settled into this auto-extend environment.
Another critical piece will be ensuring homeowners get the right solution for their unique situation and giving them avenues to self-serve, when possible. Through the adoption of digital tools and increased staff, we have focused heavily on ensuring borrowers have the tools and resources they need to know what options are available to them and make the best decision possible. If a customer gets to a point where they need to speak to someone on the phone, it’s critical to have agents that are skilled in those conversations and ensure they have a solution before the call is over. If the solution is not clear-cut for a homeowner, the important piece is to ensure the customer has full understanding of the options available to them. Above all, the key to success is meeting the customer where they are, especially in times of need.
How do you balance automation and self-serve options against having a human touch?
I think most customers are like me these days—especially coming out of the pandemic environment—they’re not used to talking to human beings anymore, nor do they maybe want to. So we need to make it as easy as possible for [the borrower] to get the information or chat with someone without having to make the phone call and wait.
However, if they do have to make the phone call, and you know they may still have a financial hardship, we need to give them the best experience possible. The time spent on the phone should be time well spent, not something that will make it more difficult or frustrating for the customer. Do as much as you can to avoid the phone call for the customers’ benefit, but if they need us, at the end of the day, we need to be ready, and they need to have an excellent experience on the phone.