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Seizing the Moment With Servicing Automation

This piece originally appeared in the July 2022 edition of DS News magazine, online now.

These are uncertain times for the real estate industry, and what lies ahead is anything but clear. For businesses in the default servicing, REO, and asset management spaces, however, this new cycle does not come on the heels of record profits and volume. If anything, the default servicing industry has been battling subdued volume for some time now. And yet, in some scenarios, that battle will continue into the near future.

Although opinions vary as to when and how much, it is highly likely that volume will increase for default-based businesses in the next year. How prepared they are for any level of spike remains to be seen. But while automation has become the order of the day for our cousins in the origination and title insurance industries, it’s not clear that the default space has followed suit—at least, to the widespread extent we’ve seen elsewhere.

After all, it’s a tall order in an industry that historically endures thin margins to ask businesses to invest thousands in new technology while order volume is relatively low. This is especially true when there’s no guarantee as to when volume will spike significantly.

Surprisingly, that’s exactly why now is the perfect time for businesses throughout the default servicing space to thoroughly review their existing operations and workflows, and then update them for maximum efficiency through strategy and appropriate technology. Now, more than ever, the purchase doesn’t have to break the bank, nor does the implementation period need to bring the operation to its knees.

The Solution—Automating During Lean Times
For decades, the larger real estate industry had basically two choices when deciding to automate: invest panic-inducing amounts into global technologies and hope they had a feature or two that addressed the purchaser’s unique operational needs, or continue to “do it the way we always have,” secure in the knowledge that there would, at least, be no sunken costs from any failed implementations.

Today, however, the other segments of the industry have gravitated from the concept of “end-to-end” technology to specialized technology and customized or well-configured tech stacks. Now, it’s fairly easy to find technology solutions that address one or two functions. Even better, the new prop-tech arrivals to the market seem quite cognizant of the damage done by technology-fueled operational silos conjured in the chaotic early days of the TILA-RESPA Disclosure Rule (TRID). Accordingly, these new, specialized technologies have usually been designed to easily integrate with or co-exist with the buyer’s existing technologies.

Automate to a Well-Planned Strategy … Not Just a Good Demo
With that in mind, any well-run business planning for an uncertain market environment needs to perform an unbiased and unyielding review of its workflow. Involve objective, reputable third-party experts if needed. Identify the biggest pain points in your process (they’re usually pretty obvious—just ask the frontline employees working through them on a daily basis) and search for tech solutions.

However, do not fall prey to technologies searching for you, as many before have. A solid strategic automation and operational plan has far less to do with available technology and far more to do with the operational need. Far too many have fallen victim to good sales technique, better demos, and the catch-all promises that come with the latest, shiny new technology. As a result, more than a few COOs and CEOs have been shown the door when those shiny new solutions became sunken costs.

It's also important to consider, where possible, flexible, “future-proof” technology. We’re living in what some might consider a renaissance period—at least for the mortgage and real estate industry. Who knows what RPA (robotic process automation—often referred to as “bots”) or AI (artificial intelligence) will bring us next? The savviest operational decision-makers are certain to ask the technology developers they’re talking to exactly how their solutions will adapt when the next game-changer comes along.

Why Firms Should be Automating Now
It’s the worst-kept secret in the industry that, for years, mortgage and real estate businesses would resist new technology in times of healthy order volume because they didn’t have the time to deal with a show-stopping implementation nor the willingness to distract staff with training. Of course, when the market slowed, the explanation invariably evolved to “we can’t afford this kind of investment in this kind of market.”

Those excuses presumed conditions that, although once very real, have recently become false. Most new, specialized technologies take minimal downtime or workflow disruption to install. And although any new technology is an investment, not all come at nearly the same price tag as a new LOS or production platform.

If anything, times of reduced volume are the perfect times for implementation and effective training, not to mention earning buy-in from the everyday users. Specialists or processors asked to suddenly learn how to use a new tool while they are struggling to keep up with order volume are far less likely to stick with it than employees allowed to gradually learn its use.

While obvious and well-discussed, there are also the ultimate benefits of employing better-fitting technology: time and cost savings, increased productivity, and improved profitability. But there are other, long-term benefits as well. Our industry is also one known for meeting increased production demands when a market expands by hiring in numbers.

And when the market inevitably contracts, so too do their payrolls. Unfortunately, this strategy is inefficient and damaging in numerous ways. Appropriate technology, however, by reducing the need for manual processes, doesn’t eliminate jobs. Instead, it allows an employer to better deploy existing workers to more challenging and complex tasks while ending the need to overstaff in the first place.

The concept of better utilizing staffers leads to another benefit, too. It’s well-known that one of the core ingredients to employee satisfaction is providing challenges and the tools to meet them. Simple, manual tasks are not the pathway to long-term employment. In an era where the workforce is aging and “The Great Resignation” is very real, employee retention is quickly becoming an item of discussion across the real estate industry. Automation is a core approach to a greater retention strategy.

The field of real estate technology has evolved dramatically in just a few short years. Some of the most successful lenders, title underwriters, and service providers have leveraged these new technologies to not only optimize their profits during volume surges, but to mitigate any number of traditional losses and costs as volume has declined. The expansion of options available to businesses of any size now allows them to build tech stacks unique to their needs without the need to expend a king’s ransom. And the improvement by leaps and bounds to the typical implementation process has only further diluted the excuses of decision makers unwilling to consider a strategy of automation. The result is clear: the time for automation across the default servicing and REO industry is now.

About Author: Jimmy Lewis

Jimmy Lewis is the CEO and Co-Founder of TrueFocus Automation, a Dallas-based provider of custom software bot development and Automation as a Service solutions to the title and mortgage industry. He can be reached at [email protected].

About Author: Sridhar Loganathan

Sridhar Loganathan is the COO and Co-Founder of TrueFocus Automation, a Dallas-based provider of custom software bot development and Automation as a Service solutions to the title and mortgage industry. He can be reached at [email protected].

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