Comment: This article from National Mortgage News confirms what we have known all along: there’s no THERE there. The deeds run wild if the securitization structure was not followed. Real property laws are very specific, as are the PSA and mortgage loan purchase agreement. We are FAR FROM DONE in this war for our land title system and the preservation of the rule of law.
By Austin Kilgore, Nov 4, 2015
Critical shortcomings in data management and analytics to support servicing rights transfers will become more problematic amid servicer expectations of accelerated activity, according to the results of a National Mortgage News survey.
Ongoing scrutiny of mortgage servicers by federal and state regulators, as well as secondary market agencies, has exposed numerous flaws and deficiencies in servicers’ ability to adequately handle loan files, a problem that becomes particularly evident when MSR portfolios change hands.
NMN, in partnership with SourceMedia Research, conducted a September 2015 survey of more than 300 C-suite and other senior-level professionals at mortgage origination and servicing firms of all sizes. Based on survey responses by servicing executives, problems that arise during MSR transfers appear to be mainly rooted in difficulties during the initial onboarding of a loan after origination.
The three pain points most often identified by servicers as “highly challenging” are moving data from origination to servicing systems (21%); archiving and auditing for compliance and customer contact (20%); and onboarding new loans or acquired portfolios (17%).
The ramifications of this data gap can be dramatic: A number of bulk MSR sales between large industry players have been canceled outright amid regulatory scrutiny of the integrity of consumer data and loss mitigation activities during and after a servicing transfer.
Left unchecked, the challenges associated with servicing transfers stand to intensify given general expectations of increased activity in this space. Some 36% of respondents said they expect their firms’ MSR transfer activity will increase “somewhat” or “significantly” during the next one to three years, while only 12% expect this activity to slow during the same time period.
The damage from servicers’ data management shortcomings is by no means limited to MSR transfer activity, and responses about regulatory risk reflect the wide array of oversight with which servicers have to contend. Servicers were most likely to rate the Consumer Financial Protection Bureau’s national servicing standards a high risk (43% of respondents).
Activity in the loss mitigation arena was second on the list, cited as a high-risk compliance requirement by 33% of servicers. The CFPB rules, which took effect in January 2014, prescribe timelines for numerous servicer practices and institute a number of consumer protections for distressed borrowers. Loss mitigation efforts are often complicated by disparate investor requirements and program guideline changes.
In addition, compliance with judicial foreclosure laws was cited as a top risk by 26% of servicers, while compliance with other state and local laws were named a top risk by 25% of servicers. This sentiment reflects the relative difficulty servicers face in applyinginconsistent laws and policies to a nationwide portfolio of loans.
Many servicers also report that a lack of access to data-analysis tools leaves them unable to analyze loan portfolios with an eye to identifying loss mitigation or revenue-generating opportunities. Despite nearly 10 years of elevated levels of default, a mere 40% of servicers said they use analytics to evaluate borrower payment history and trends, and barely half said they analyze their portfolios for opportunities to conduct early-stage delinquency outreach.
And while a majority of servicers name portfolio retention and organic portfolio growth among their highest priorities for 2016, only 40% of servicers said they use analytics to identify and proactively reach out to existing customers who may benefit from refinancing.
Given the stated ambitions of servicers to change the state of customer service and the extensive gaps that exist in many companies’ current portfolios of tools related to customer service, this would appear to be a segment ripe for incremental investment in the coming year.