The Rite Way Servicing Company sits in a quiet neighborhood in Brooklyn just a few minutes off the highway and easy to find. The commuter trains out of Manhattan stop nearby, and so does the subway. Any homeowner that has a loan with Rite Way can get there easily if they want to, and many of them do.

The company has its first floor set up to accommodate the different types of business that its customers need to transact. One set of counters takes applications for new mortgage loans, a second takes in checks and cash from customers that like seeing their bank every now and then—some of the older customers still like that—and a third works with borrowers that have fallen behind on their payments. The counters are fully staffed, and judging by the demeanor of the men and women there, the staff seems to enjoy the work. And they seem to enjoy each other. Every now and then when a customer asks a question that’s new to the agent, you will hear a call for Joe or Beth, and a colleague will come over to consult.

I should also mention the rows of armchairs where customers can sit and wait, and the area in the corner of the floor with a soft mat and toys where children can play while their parents take care of business. These areas are empty most times, except on the odd Saturday, since the lines at the different counters move quickly. Still the company provides the chairs and keeps them straight and clean to make the customers feel welcome.

This does sound a little ideal, but most of the company’s business actually gets done on the upper floors by people answering telephones or in front of computer screens.

You don’t service loans spread across the country from a few counters in Brooklyn.

Still, the staff answering phones or e-mail seems just as energetic and knowledgeable as the staff downstairs—some of that likely explained by the classrooms on each floor, usually full. Things change in the mortgage business quickly, so you need to keep up.

The company philosophy is to keep up a good relationship with the customer all along the way so that if things do get tight, the customer trusts you enough to ask for help.

That can work out for the company, too. You can fix things before they get too far. Once a year, for example, Rite
Way holds a job fair for customers facing a tough time. Good for customer and company.

Finally, there is the top floor of the building where all the computer programmers work. The servicing business involves so much data and paperwork that nothing could get done without the programmers. The secret to the servicing business is that the programmers are the stars. They manage to turn all the paper into electronic files so that any associate taking a call from a customer can pull up copies of applications, contracts, comments from past calls or anything else in the customer’s file. And the programmers have written widgets that read a customers file and help the associates see if a new applicant qualifies for a loan, or if an existing customer qualifies for a payment plan or modification or something else. That way, even on the busy days, the work flows easily.

The Rite Way Servicing Company in many ways captures an ideal about how mortgage servicing should work. But it also involves a very sizable practical problem that should be clear by now to the discerning reader: it is entirely imaginary.

The Rite Way Servicing Company does not exist.

While many mortgage servicing companies share one feature or another with Rite Way, few have turned out to be ready for today’s mortgage market. Delinquency, default and foreclosure have forced mortgage servicers to engage with their customers, not just with their money. It has forced servicers to deal with problems that change from one customer to another. That is not the way most servicers were built.

Mortgage servicing for years focused on efficiency. Scale and volume were everything. Mortgage servicers get paid a fixed percentage of each loan handled, so each servicer worked to get progressively bigger and to lower their average cost. Competition pushed the business in that direction, too.

With all the news about mistakes in loan applications and underwriting, or in the records of loan ownership and in documents filed in foreclosures, we can see the stresses that today’s market puts on businesses built for speed and volume.

The mistakes in underwriting have already led many lenders to buy back those loans.

And the mistakes in recording ownership or in foreclosure documents will probably mean spending more time and money to correct those mistakes before moving on. We can imagine what mortgage lending should be, but this latest episode is a reminder of all the time and money it will likely take to get there.

Steven Abrahams is Managing Director and Head of MBS and Securitization Research at Deutsche Bank Securities. This article is originally published by Deutsche Bank in The Outlook in MBS and Securitized Products.

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