What a year 2013 was for the mortgage servicing industry. Not only did delinquencies and foreclosures drop dramatically during the year, rising interest rates led to a sharp decline in mortgage refinancings. On top of this, servicers had to deal with implementation of the Consumer Financial Protection Bureau's (CFPB) new servicing rules going into effect in January – while the top five largest servicers continue to struggle with the mandates set forth in the National Mortgage Settlement. Beyond this, the new regulatory environment has led to a complete sea change in default servicing strategy and philosophy, as home retention has taken center stage and loss mitigation has been relegated to a secondary role.
So what do industry leaders think were the top factors that reshaped the mortgage servicing industry in 2013? And what factors do they think will continue to reshape the industry in the coming year? To find out, MortgageOrb interviewed top industry professionals including George FitzGerald, senior vice president, product management, servicing solutions and technology division, for Lender Processing Services (LPS). What follows are FitzGerald's responses to our questions:
Q: What do you think were the top three main factors that reshaped the mortgage servicing industry in 2013 and why?
FitzGerald: I would say the number one factor shaping the mortgage servicing industry in 2013 was regulatory preparedness. A lion share of the work we've seen our clients' focus on for much of 2013 has been on preparing for the CFPB servicing rules and requirements that go into effect in January.
The second biggest factor would be decline in defaults. Even though we are seeing a continuous decline, there is an ongoing focus on helping delinquent customers through home retention programs and trying to keep borrowers in their homes. Loan modifications have become a mainstay in a servicers toolbox for home retention.
The third biggest factor shaping the industry in 2013 was the drive to standardization. Many in the industry are working to standardize processes, rather than differentiate their processes from others. The days of developing your own ‘secret sauce’ are long gone, and servicers don't want to stray too far from the pack. Organizations still strive to distinguish themselves through superior customer service, but overall, servicers are working to conform to standardized processes and practices that fall within regulatory requirements.
Q: What do you think are the top three factors that will reshape the mortgage servicing industry in 2014 and why?
FitzGerald: I think the number one factor that will shape the industry in 2014 is execution. With the CFPB changes scheduled to go into effect in January, and other regulatory changes expected in 2014, servicers' efforts will be focused on execution in complying with these new mandates. There are still some questions related to the servicing file and what data needs to be on the statement, but these will get ironed out soon and the focus will be on executing these changes, while adding more transparency with the customer.
The second biggest factor for 2014 will be streamlining servicing costs. With the rapid pace of change over the last several years, many servicers have added staff to help meet changing requirements. With programs like the Home Affordable Modification Program, Home Affordable Refinancing Program and other borrower retention programs, as well as the upcoming CFPB rules, servicers have hired people to help them rapidly meet these initiatives. But in 2014, we will see a shift to better align processes/resources and an increased focus on reducing costs and increasing efficiency.
The third biggest factor that will reshape the industry in 2014 is cross selling. With the industry shifting to a customer-centric culture – and in an effort to help with profitability – many servicers will implement and/or accelerate cross-sell initiatives to build a stronger borrower relationship where appropriate. Because the cost to service mortgage loans is so expensive, servicers will be looking at their mortgage portfolios to determine if mortgage loan relationships might be a catalyst to expanding into other areas like checking accounts, savings accounts, CDs, etc.
To read additional responses from other mortgage industry professionals, check out our ‘year in review’ features in the December issue of Secondary Marketing Executive magazine and the January issue of Servicing Management magazine.