PERSON OF THE WEEK: Barry Malone is senior vice president of sales for Financial Industry Computer Systems Inc., a provider of mortgage loan origination and mortgage servicing software.
MortgageOrb recently interviewed Malone to learn more about the challenges of in-house servicing and what makes for a successful in-house servicing program.
Q: What are some of the key challenges in-house servicing presents within the mortgage industry today?
Malone: In-house servicing requires a comprehensive set of technologies for servicers to be efficient and compliant. Servicers need robust technologies that are interfaced to provide seamless dataflow for every facet of mortgage servicing from loading borrower and loan information, automated payment processing, escrow administration, investor reporting to IRS year-end reporting. These integrations can be complicated depending on the systems and vendors that servicers are using. Furthermore, servicers need to have real-time online mobile access for borrowers to accommodate the expectations of today’s consumers.
Q: Beyond comprehensive technology, what characteristics make for a successful in-house servicing environment?
Malone: Comprehensive, innovative technology is really the key. To optimize technology, servicing companies must couple mortgage servicing software with an experienced team that can handle the ever-changing compliance demands. As compliance becomes more complex, servicing companies are constantly working to keep ahead of new reporting requirements. Knowledgeable, well-trained staff are essential for success.
Q: In what ways can in-house servicing be mutually beneficial for both servicers and customers alike?
Malone: In-house servicing presents many benefits for servicers. First, it can be a profit center for servicers selling loans into the secondary market (i.e., Fannie Mae, Freddie Mac and Ginnie Mae). Utilizing the right technology, servicers can easily average over 1,000 loans serviced per employee – and sometimes substantially more. Using the national average mortgage loan ($172k) and the standard service fee (25 basis points), that’s on average $430,000 in service fee income per employee per year. Based on the loans’ performance, it’s easy to see how the servicing department can yield huge profits for the lender.
Second, in-house servicing can lead to more sales opportunities via more personal customer relationships. Depository institutions such as banks or credit unions may have multiple touch-points with borrowers who have multiple accounts (e.g., car or personal loans, checking or savings accounts or credit cards). A mortgage loan is viewed as a long-term sticky product, meaning that the borrower will have frequent interaction with their mortgage servicing company for an extended period.
This presents a key opportunity to cross-sell other products. Though, if a mortgage originator sells the loan and the servicing is transferred to a different institution, the originator may lose that borrower for future business. When it comes time to refinance, the borrower is likely to refinance with the lender currently servicing their mortgage. And if the servicing is outsourced and the borrower experiences issues, the loan originator is out of the picture and the borrower is more than likely to turn elsewhere for future financing needs.
Customers appreciate having their loans serviced by their original lender. They won’t be forced to deal with a new, unfamiliar company.
Q: How will current and future changes within the mortgage landscape impact in-house servicing technologies?
Malone: One thing you can count on is that there will be changes in the servicing industry. But that’s nothing new. Changes in mortgage servicing regulations have been occurring for the past 50 years. The key is to partner with a technology vendor that’s one step ahead of all the regulatory shifts to ensure that servicers have the tools to manage reporting changes and continuously educates their clients
Q: What is FICS doing to provide servicers with the tools necessary to successfully capitalize on in-house servicing?
Malone: FICS has been working diligently to help ensure that our software can support flexible integrations with all the third-party systems and vendors and that their processes are seamless and automated. Mortgage Servicer and Commercial Servicer come with a wide variety of built-in interfaces to external systems, with FICS continually introducing new interfaces.
Mortgage Servicer includes interfaces for print vendors, credit bureau agencies, real estate tax service companies, MI companies, general ledger systems, lockbox providers, agency investors (Fannie Mae, Freddie Mac, FHLB and Ginnie Mae), bank and credit union core systems, custom report writing, forms generation, online banking systems, enterprise scheduling tools, data warehousing systems, core imaging systems, MERS, insurance tracking vendors, USDA/RHS, FHA, VA, HAMP, collections tools, IRS and many more. FICS’ very flexible API allows these interfaces to be scheduled and automated, increasing efficiency for servicing both performing and non-performing loans and giving your servicing employees more time to focus on customer support.
Utilizing automated interfaces, servicers are now able to service more loans per employee than ever before, with some even reaching 2,000 loans per employee and beyond. Based on the service fee income this generates, servicing companies are now in a position to profit more than ever before.