An ice storm? Really? As if our industry hasn’t been sufficiently punished for its handling of the foreclosure crisis, now even the weather gods are piling it on. A day and a half of freezing rain has turned Dallas into a sheet of ice just in time for the Mortgage Bankers Association National Mortgage Servicing Conference & Expo to “slide’’ into town this week.
But the roads aren’t the only things that have “frozen” here in Dallas: a strong argument could be made that the servicing industry is “frozen” in place as well.
Same Challenges, Few Answers
Yesterday afternoon, I attended an event and, as expected, the discussions focused heavily on compliance, what the Consumer Financial Protection Bureau expects from servicers, and the need to invest in and demonstrate compliance management. No one, however, was talking about how to make money in servicing.
Over the next few days, there’ll be several sessions on cost containment, customer service and regulations. Meanwhile, attendees will be talking about the latest announcements from Ocwen, the new capital requirements from Ginnie Mae, and what this all means in terms of servicing capacity [for the future of the non-bank servicing.]
If past industry conferences are any indication, there’ll be plenty of complaining about how unreasonable these demands are, given the current compensation levels; and how new regulations are focused on past issues that grew out of a once-in-a-lifetime event, rather than the kinds of loans we’ll be servicing today. What there probably won’t be, however, are lots of new solutions to these problems. The obvious reason is that these challenges are hard to solve; but another is that we, as an industry, seemed to have stopped trying.
All we’re focused on is: What do the regulators want? (Don’t get me wrong. We should be focused on that, just not exclusively.)
Unfortunately, what the regulators and the GSEs want is perfection — zero defects. But realistically, servicers don’t get paid nearly enough to produce a zero-defect product, and borrowers aren’t widgets: lined up all nice and neatly on an assembly line.
Today’s more-educated, more-skeptical customers definitely expect better service and real-time access to information. They want to transact immediately, even if that means checking their escrow balance at two in the morning. And if they don’t understand something, or they encounter the slightest error, they suspect the worst: their servicer is doing something underhanded. So customer service, and with it customer expectations, are certainly big factors in our cost dilemma.
But what are we doing about it? One way to accommodate 24/7 queries is to have 24/7 workforces. But this would mean offshoring, which many companies, ours included, have determined have their own issues.
Technology certainly has a role to play. I’d argue that we need to be looking at world-class companies, like Amazon and Zappos, as examples of how to transact and delight customers. Similarly, we need to be looking closely at promising, new advances in telephony technology, particularly in areas, like keyword recognition.
But rather than investing in these new approaches, our industry keeps imploring our legacy tech providers to give us more functionality. But how much more functionality can you tweak from green-screen systems and portals that were outdated before dotcom 1.0?
One of the topics that is not on the agenda at this conference, though it is certainly a topic that comes up in meetings we’re having with clients, is: Does our industry need more servicing capacity and where will it come from?
Clearly, the regulators are uncomfortable with the prospect of giant non-bank servicers. But what size should servicers be? Twenty years ago, 100,000 accounts was a big servicer. Now, it’s the bare minimum. But, if that’s the floor, is there also a ceiling? Is it two million accounts? Can a Nationstar get to four million? Will we see more mid-size servicers? True, the money center banks are servicing five, ten, fifteen million accounts, but many are shedding MSRs for either capital or reputational reasons or both.
So who’s going to service America’s loans? And how will they make money at it? These are questions that need to get asked and answered.
Oh, and one more: Is it really going to snow in Dallas tomorrow?