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Navigating Loss Mitigation in a Low-Default Landscape

Denis Brosnan is President and CEO of DIMONT, a provider of technology-enabled solutions in specialty insurance claims processing and collateral loss mitigation management for mortgage and auto lenders, servicers, and investors.

A leader with deep experience guiding technology and technology-enabled service providers through various lifecycle phases, Brosnan spoke with DS News about 2019’s challenges and lessons, from updates in technology to fluctuations in default volume.

What industry challenges and trends have defined 2019 from your perspective?

For most servicers and vendors in the default space, the volumes continue to be the biggest challenge. The implications of historically low volumes are that most servicers are trying to cut costs. Most service providers are trying to do more with less. There has been a lot of consolidation in the industry as portfolios have moved from one servicer to the next. For most businesses, that's a challenge.

How does the auto finance market compare to the mortgage business? Are there lessons you can carry over into the mortgage space?

There's commonality. It was challenging early on to branch into a different market segment, but many of the ways you go about doing business and building relationships are analogous. We got into that space (specifically repo claims) because in our core business in mortgage and hazard insurance claims there's an analogous situation: we're recovering insurance claims from distressed or damaged collateral. The challenge that we didn't understand going into the auto space was just how fractured and fragmented the data environment is for insurance information.

What are some of the challenges that you are encountering with FHA loans?

FHA, from an investor claim standpoint, continues to be one of the biggest challenges in the marketplace. The process is long, convoluted, arduous, and fraught with errors and technology deficiencies. If you make a mistake, it becomes expensive quickly. Obviously you can audit the servicer and say, okay, you've made this error a few times and now we're going to just assume that you're making that across your portfolio, assess a big penalty, and all that. We spent an awful lot of time analyzing what it takes to really get a property into conveyance condition and looking at gaps in the process and ways we can help fill those gaps.

We've identified many areas where it's not necessarily somebody's fault: it's just a lack of coordination, a lack of communication, and systems that don't talk to each other. We're in a unique position to be able to plug many of those gaps because we're good at the collateral; we're good at data and moving data between systems and we're good at investor claims. We know what the file needs to look like in order to be successful in the claim.

How can the industry address inefficiencies in the hazard and investor claims management process?

It comes back to communication and coordination. So many times, we find that the components within the servicing shop that are responsible for, say, property preservation are not communicating effectively with the folks that are responsible for the investor claims process, and may not even be in the same location half the time. Sometimes there are policies that haven't been looked at for a long time.

In many cases, we find ourselves in the hazard side pursuing claims that maybe are not really worth it for the bank to pursue. They're not big enough in potential recovery size and the additional time that it adds to the process doesn't make it worth while. They should just go ahead and advance that and get the repairs done themselves. Many times in our working with servicers, we actually print these huge architectural diagrams on blotters at FedEx, have the guys come into our shop, and we'll show them: this is the hazard process. This is the investor claims process. They're up on the wall. We take out colored pencils and we show where our process is and where we think those bottlenecks are with them.

How has the nature of interacting with legacy systems changed?

It always comes down to the people. We interact with legacy systems all day, every day, to the point where we just assume that we're going to have that. Systems access is always an issue. Moving data is always an issue. It's frustrating that you have to work through that, but sitting down and having real business conversations with the servicer or with the other parties, setting expectations that are realistic, that is the biggest thing you can do.

About Author: David Wharton

David Wharton, Managing Editor at the Five Star Institute, is a graduate of the University of Texas at Arlington, where he received his B.A. in English and minored in Journalism. Wharton has over 15 years of experience in journalism and previously worked at Thomson Reuters, a multinational mass media and information firm, as Associate Content Editor, focusing on producing media content related to tax and accounting principles and government rules and regulations for accounting professionals. Wharton has an extensive and diversified portfolio of freelance material, with published contributions in both online and print media publications. Wharton and his family currently reside in Arlington, Texas. He can be reached at David.Wharton@theMReport.com.
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