This piece originally appeared in the October 2022 edition of DS News magazine, online now [1].
For loan portfolios to be serviced properly, the performance of the asset is constantly analyzed and confirmed throughout the life of the loan. This means from the time a loan has originated and transferred to a sub-servicer, to when the mortgage is paid-in-full or closed-out, data analysis must be used to identify pertinent information about the loan throughout each stage: where it needs to go and when, what is happening from initial point of transfer through ongoing payments and final steps. Are there opportunities or gaps in a loan situation or operational process that can be improved, etc.? Understanding these aspects is a vital part of servicing and provides the ability to:
- Enable exceptional customer experience
- Optimize operations to maximize cash flow and performance
- Ensure all state, investor, and regulatory guidelines are met
The challenge is data alone is just that—data. However, data with insights ensures meaningful value is found, allowing one to quickly make confident business decisions, no matter what role he or she plays within an organization.
Beyond providing data in a consumable form, teams will need to be ready to embrace it. This includes training in data analysis to see the patterns and trends and what they mean.
Encourage ways to lead with curiosity to seek the exceptions and understand why and what actions can be taken to maximize opportunities and address challenges.
In the many years I’ve spent navigating the opportunities and challenges of data, I have found successful servicing performance management is rooted in three key concepts.
1. Create a Single Source of Truth
Servicing data sources can be quite varied and siloed, and every data extraction slightly different. A servicer may receive initial output from a variety of platforms, reports, and spreadsheets, but often the data collected is not pertinent or useful in the format gathered. And it’s a lot of data.
It is much more beneficial when the servicer can capture the aggregate, connect disparate dots, know the data is accurate, and then transform that data asset into an engine of meaningful insight and analysis to drive business on all cylinders.
This involves developing a mechanism that can aggregate, distill, and communicate data in a way that enables faster response times and more effective financial and KPI tracking. It also means having clear objectives and metrics to monitor and optimize throughout the servicing cycle. For example, a comprehensive understanding by the operations team of who, how, and when payments are being made can derive strategies to improve the payment experience.
The overarching objective is to consolidate the disparate data sources into a single source of truth. We’ve all been in meetings where more time is spent discussing the difference between numbers on reports than making meaningful progress on a topic. Once the data is consolidated, the use of data visualization and interactive dashboards make the information even easier to absorb, faster to analyze, and actionable for all servicing stakeholders.
2. Empower the Servicing Team
Build a data-driven culture by empowering teams across the servicing spectrum with useful data at their fingertips. Deliver it in a manner that is faster, more convenient, and more effective when it comes to managing their workflow. Organizations can reduce the friction of transitioning from multiple Excel spreadsheets to a centralized data analytics platform, by making it a one-stop shop for users to intuitively find what they need and when they need it. This ease and empowerment make evolving from traditional processes within an organization a no brainer.
A centralized and comprehensive data platform also helps take servicers on the journey with their homeowners to create a deeper sense of empathy. First, they can understand the customer experience—how customers are interacting with the servicer about their loans, why customers call into customer service, what types of online interactions are occurring, who needs assistance, and if they are being helped to their satisfaction. Understanding these situations is vital to helping cross-functional teams adjust the way they engage with customers.
Simultaneously, a servicer is working with its business clients, using oversight data each day to understand what’s happening within the portfolio itself. The fact is, not all clients are the same. They each have different objectives, goals, and service level agreements (SLAs). That said, at the end of the day, they are all interested in the same core objectives to:
- Enhance the customer experience
- Streamline operations to improve cash flow and performance
- Successfully meet state, investor, and regulatory guidelines
A best-in-class data analytics platform drives the quest to address all three of these objectives daily. The most advanced servicers can deliver transparency across all components of the servicing operation at any point of time or workflow. These insights empower employees with smarter decisions to optimize performance, identify opportunities, and mitigate risk for homeowners and clients alike.
3. Collaborate Through Transparency
When there is transparency between servicers and clients, meaningful conversations can take place regarding asset performance, portfolio objectives, and risk mitigation. It is often in these collaborative discussions that product, service, and experience innovation happen. The magic created further advances the outcome, maximizes the partnership, and enables extraordinary results.
Monitoring is how transparency is achieved. With proper tracking, high-value KPIs shine a light on where objectives are being met for onboarding, loss mitigation, claims processes, and payments. For example, instead of simply providing counts based on loan products like FHA, context is provided with items such as escrow, tax and insurance management, location, natural disaster, loss mitigation or collections process maps, etc. It’s about ensuring there is visibility and access to the details needed to understand status and make decisions. Equally important is that both servicers and clients have the same visibility and data metrics to manage their portfolios most effectively together.
Case in point: loan onboarding is a highly collaborative activity with significant dependency on the origination closing process.
One of the most important KPIs to customer experience is a smooth onboarding experience with efficient processes and compliant to all regulations. This complex process must be delivered in the frictionless manner that customers expect, which, in turn, builds loyalty.
Being able to track all the moving parts, documentation, insurance, and escrow taxes, as well as knowing where they are at any point in the process, is invaluable to both the lender and servicer to keep things running smoothly in their collaboration.
At the same time, there's only so much one can do when inaccurate or inadequate information is received. Proprietary tools such as LoanCare Document Tracker, akin to Domino’s Pizza Tracker, keeps tabs on what’s happening with the data. The operation is able to understand status and gaps during the transition process to immediately address issues down to the loan level for faster resolution.
Similarly for homeowners, a servicer can initiate a positive engagement with new customers even before the bulk loan transfer takes place. Using a data-driven set of communications, servicers can notify customers where they are throughout the onboarding process to give a better understanding of what's happening with their loans, check on status of their accounts, find payment information, and access frequently asked questions.
What Other Types of Data-Driven Technology Are Adding Value?
We are seeing increased requests for LoanCare ABM, an account-based marketing program that targets messaging and content and offers to homeowners with the highest propensity to be interested. Besides generating more qualified leads as well as up- and cross-sell opportunities, messaging relevancy to the homeowner’s mortgage situation also strengthens customers engagement throughout the mortgage servicing journey. Lenders can deepen the relationship they have with their customers by showing them all the opportunities they have to advance their financial situation and maximize the ownership of their home with their servicer.
On the homeowner side, consumer marketplaces are increasing in popularity. They target very specific, loan-based ads by leveraging supplemental data obtained from consumers about their financial objectives. For example, a customer might indicate that within the next number of years, they are planning to move, purchase a car, renovate a home, seek better homeowners’ insurance, shop for solar panels, or send children to college. It's in those major life moments where there are large financial goals that cause customers to consider tapping into the equity of their home or learning what the financial institution who owns their loan may offer. Again, it’s about deepening and broadening the relationship that clients have with their customers. Personal financial data drives the offer that, in turn, drives the relationship.
The more customers’ objectives can be catered to by a financial institution, the more they will feel like they have a partner in the financial asset management process. After all, their home is the largest investment they will likely make in their lifetime. And through these marketplaces, lenders and servicers can demonstrate that they fully understand that financial commitment.
The Technology-Driven Servicer Will Lead During Economic Shifts
COVID-19 forbearance and the administration of the CARES Act caused servicers to either sink or swim—there was no middle ground. The process was strenuous and required an immense amount of teamwork between the servicers, as well as with government entities like the Consumer Financial Protection Bureau (CFPB). The servicers that swam were able to track where loans were and how the regulatory changes impacted them, greatly reducing risk while assisting customers through a significant life event of uncertainty. Visibility into a system was necessary to understand exactly where loans were and how they were performing to be able to move quickly. What was standard for years had been completely disrupted. Simply put, when things are changing so much and so quickly, servicers that don’t have automation and data will not be able to ebb and flow fast enough.
The future is now. Data-driven technology is here. Harnessing it to provide the single source of truth, employee empowerment, and collaboration through transparency will advance outcomes across the mortgage servicing spectrum.