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This piece originally appeared in the May 2023 edition of MortgagePoint magazine, online now.
Keeping your finger on the rapidly changing pulse of the servicing industry takes top, experienced talent. A collective group of individuals with an experienced and visionary management team at the helm can guide any team through the roughest of waters.
Saying that the hurdles brought forth by the pandemic and its fallout impacted the industry is an understatement. Management was forced to pivot and deal with a number of new scenarios and challenges never encountered.
Servicers such as Selene Finance faced these challenges head on, drawing on past experiences and, in turn, guiding their customers to equitable solutions and helping to keep them in their homes during a time of crisis. As Selene management stresses, establishing open lines of communication with their customers is the building block to attaining customers for life.
JT Grubbs, EVP of Loan Servicing at Selene, plays a key role on that management team, contributing 19-plus years of experience in financial services and real estate to the firm. Prior to joining Selene, he held executive roles leading all aspects of mortgage originations, servicing, and default operations at Countrywide, JPMorgan Chase, and Capital One. He began his career in 2004 as an AE with Countrywide Mortgage Services.
MortgagePoint recently had an opportunity to chat with JT to discuss recent trends in the servicing space, and what it takes to gain customers for the life of a loan.
Q: How did you get your start in the mortgage finance space?
Like most of us, it was not intentional. After obtaining my college degree, I spent eight years building a business and a young family. As my kids actually started entering school and had their own activities, I had to make some difficult decisions. I sold the business with no plans, based on faith, just knowing that making the right decision, no matter how difficult, was always going to be the right path.
In doing that, my initial and longest-standing client heard that I was selling the business and asked what I had planned to do moving forward. And as fate would have it, she was Managing Director of a tiny mortgage organization known as Countrywide Specialty Lending. She saw something in me that she believed translated into this business. And since that day, I’ve spent seven years in various origination roles and 13 years in servicing and default.
Q: What was the state of the housing marketplace when you first became involved with it?
As I reflect, I would characterize it as the proverbial peak. Homeownership rates were at an all-time high; the Fed had just lowered the Reserve’s key interest rate down to at that time an all-time low of 1%; and the Administration at that time had been pushing through key initiatives such as the American Dream Downpayment Act.
There was a tremendous amount of pressure on the increased affordable housing goals that had been set for the industry, and credit standards were loosened to help accommodate and meet those goals. Appreciation rates were exceeding 25% in some areas, and I think in hindsight, I would characterize it as the bubble everyone talks about, or the House of Cards.
Q: Having been with Countrywide, Fieldstone, and Chase during the mortgage meltdown, what lessons did you learn from that period that can be applied to today’s housing market?
I think the real lesson was in resiliency—let me frame that up for you. This period was early on in my career. I only experienced a couple of what were known as “The Glory Years.” Even during the early years, it was common knowledge that the housing market was known for its cyclical nature. The industry experienced some significant consequences of the risks taken to open the dream of homeownership to more Americans, but the housing market has always proven to be resilient. When you apply those lessons learned, the current market is no different.
Year over year, the macroeconomic factors driving the different markets, including buying, selling, originating, and servicing, are consistent and simple. Equity matters, affordability is critical, and options are available. Every experience prepares us for the next experience, and the meltdown was no different.
Q: How did Selene work with the government and regulatory bodies during the pandemic to keep Americans in their homes in a time of economic tumult?
Selene was founded in 2007, right out of the meltdown, and has a long tenure assisting at-risk or delinquent customers. We engage and interact with government agencies and regulatory bodies on a routine basis, and the time of the pandemic was no different.
Internally, we maintain a team of individuals dedicated to the identification and administration of government-relief programs. When the Homeowner Assistance Fund (HAF) was first created, we recognized that proactively participating in industry working groups helped define program standards and best practices for both program administrators and the broader servicing industry. This early engagement allowed our customers to begin receiving relief immediately upon implementation of even the pilot programs. Even today, we continue to see a consistent volume of applications and awards for our customers, and we attribute it to the HAF awareness initiatives we’ve implemented internally that are aimed at educating our customers on all the loss mitigation options available.
Q: How has the landscape of the servicing space changed in this current economic environment with inflation and continued economic strain?
Generally speaking, the landscape has not changed much. I think we are at an inflection point, but servicing is a highly regulated industry that has always, and continues to, need to move at the speed of quality.
The real impact of inflation and economic strain is on the cost to service alone. As a servicer, we are experiencing increased cost to service, and because of that, we must maintain a strong financial discipline, a steady change in management and risk control framework, and nimble technology capabilities. Those are table stakes in our industry.
In this type of environment, if you’re absent any of those critical disciplines, then we may see the landscape change, and it will more than likely change through consolidation and acquisitions.
Q: What trends are you currently seeing in the servicing space? Are there any that particularly stand out?
I think it goes back to some of the other responses, and what we learned from the 2007-2008 timeframe. Not surprisingly, one of the largest trends that we have seen at Selene is increased customer engagement.
Technology has improved, and we have seen greater utilization rates through digital channels. Because of that, we have seen better service levels through voice channels because it takes the pressure off, and we actually speak with the customers.
Coming out of the pandemic, this is where past experiences have prepared us for this environment, and this is different from 2008. This time around, homeowners are prioritizing their mortgage. That’s a trend we are seeing. I think the drivers of that prioritization obviously are the equity positions that have been created, and the fact that the home has become the office. There is a need for a quiet, reliable place for remote workers to produce their income.
In addition to that, I think individuals are prioritizing their home because there is no affordable alternative. You cannot even move down an asset class in the rental market.
I think one of the other trends we see is the increased demand in home equity loans—driven solely by the rate environment. People are wanting to access equity due to inflation, and the way to do that is based on the interest rate environment.
Q: What tools would you suggest that servicers have in their toolkit to make it and excel in today’s marketplace?
I am a firm believer in simplicity. Regardless of the state of the marketplace, there are two key elements needed to excel. One is top talent, which is defined as people who execute collectively to a well-defined mission and consistent vision. I think the second is top technology. We have been and still are in a technology revolution, and it moves faster than any of us ever believed it could move. Utilizing top technology solutions and strategically building your infrastructure and architecture to be nimble are absolutely critical steps to excel in today’s marketplace.
Q: Does Selene have any programs or products in the works set to be rolled out in the near future?
From a technology standpoint, meeting customers in the channel of choice is important.
From a financial aspect, your digital interactions come with a lesser cost, but there are individuals who need to and still desire to communicate through a voice channel. Significantly enhancing our digital capabilities is our primary focus.
The other thing that some may or may not know about Selene in general is we also have a due diligence organization, Selene Diligence, in the Selene family of companies. Selene Diligence continues to build out its product set, and is offering dynamic due diligence services.
We also have Selene Title as well, which has continued to build out their national footprint and build the capabilities to service single-family rentals and originations in default markets.
Q: What lies ahead for the servicing space for the rest of this year and beyond?
From my perspective, based on recent events such as the pandemic and even the recent banking failures, we should anticipate increased regulatory oversight and engagement.
We will all feel the increased financial pressures for the reasons I mentioned earlier. The mortgage industry has always proven to be resilient, and with a strong focus on financial discipline, and moving at the speed of quality, we will absolutely be pressure-tested over the next few years.
From a customer perspective, we will experience longer-term relationships due to the decreased purchase activity and the nonexistent refinance market. Customers will stay with us longer. As customer demands continue to migrate into those digital relationships, servicers like Selene must have the capabilities to meet customers in their channel of choice like I mentioned earlier, for no other reason than to build trust. That trust is an important principle that not only drives efficiency and satisfaction, but also ensures engagement if a hardship scenario were ever to surface.
What we learned from the mortgage meltdown and the pandemic is how we established relationships and trust with customers that really separates us. From a visionary standpoint, you must build relationships when there is no hardship, so that when hardship arises, you already have that relationship established.
