In a previous post, we wrote about real disruption in the servicing industry, what it would take to make it happen and how it was ultimately up to the servicers themselves to determine what disruption will look like for their business.
What we haven’t addressed yet is why now is the right time for servicers to take full control of their businesses and the downside risk for those who don’t.
We find three excellent reasons servicers must take full control of their businesses now. First, changing compliance requirements requires lenders to have more control over every aspect of their businesses. Second, an environment that could lead to higher delinquency rates will increase servicer costs, which must be contained. Finally, borrower satisfaction is the key to all manner of financial benefits, if the servicer can achieve it.
The problem, of course, is that yesterday’s servicing software doesn’t make any of this easy.
First, we’ll discuss the disruption mandate. Then, we’ll talk about how mortgage servicers can actually get this done.
Why every mortgage servicer must become a disrupter
A number of our recent posts have pushed back on the notion that disruption isn’t a thing in mortgage servicing or that only a fintech firm or technology can be a disrupter.
Ultimately, the only parties that can disrupt an industry are those operating in the space. Consumers may drive it, technology partners may enable it, but the servicer actually has to do it.
And right now, they must.
Compliance risk in a changing regulatory environment is the biggest reason for this. It is not possible to continue to operate the way the industry has in the past and still meet the industry’s new compliance requirements. Every move the government makes is designed to push the industry in a certain direction.
Unfortunately, many of the changes we’ve seen in the past have changed the very nature of the servicer’s business. Take the Single Point of Contact rule. In the past, servicing was profitable because borrowers didn’t need a point of contact, just a place to send in their monthly payments. The foreclosure crisis changed all of that, and the servicer’s business in the process.
We can’t tell what specific changes will come next, but leading servicers have a pretty good idea of what the government wants to see in terms of borrower satisfaction and data security.
Disruption for the mortgage servicer might mean getting there first, ahead of their competition and ahead of the regulators, depending upon the servicer’s vision and technological ability to realize it.
Why disruption is the only viable strategy
In today’s environment, the servicing operation is the only part of the mortgage business that has a decent chance of delivering a profit. It’s what many loan originators are counting on to carry them through this downturn. It’s vital that the servicing operation maximize profitability.
With costs rising, compliance requirements changing and margins already thin, doing what they’ve been doing before will not be a viable strategy. Instead, every servicer will have to think like a disrupter and rewire their businesses for profitability.
And this brings us to technology. If the software the servicer is currently using doesn’t make it easy — or even possible — to take control of their business, the only thing they’ll be able to do is what they have always done in the past.
We’ve already written about what we’ve developed for the mortgage servicing industry. In summary, our efforts were designed to allow every mortgage servicer to take:
- Full control of their process
- Full control of their borrower experience
- Full access to their data at all times
- Lower overall costs
If your current mortgage software isn’t offering this today, reach out to John McCrea for a demo of our servicing software and find out how easy it will be for you to disrupt your industry by taking full control of your business now.