TMS’ Jason Kwasny on all things mortgage subservicing

Alcynna Lloyd: Hello, HousingWire listeners, today, I’m joined with Jason Kwasny, the executive vice president of Servicing at The Money Source. And today, he’ll be talking to us about subservicing and what TMS has in the works. Nice to meet you, Jason.

Jason Kwasny: Likewise.

Alcynna Lloyd: All right, before we dive in deep on today’s conversation, can you let our audience know more about you? I know you have more than 19 years of experience in the financial services and mortgage industry, and you’re responsible for managing all servicing operations at TMS. But how did you get started in the industry and what drives you today?

Jason Kwasny: Well, I actually started out on the origination side before throwing my hat into servicing, and while, you know, servicing isn’t as flashy as originations, once servicing gets into your blood, it’s tough to get out. But I actually find it more fascinating in a lot of ways than originations because of the long-term nature of the relationship with the customer. And it’s that customer relationship, well, more specifically, I would say the customer experience and that never-ending quest to bring that complete full service, front to back, no matter your situation, top-notch customer experience to servicing where, let’s face it, the industry is not known for. And ultimately, that’s what drives me every single day.

Alcynna Lloyd: Thank you for letting us know a little bit more about you and you’re the perfect person for today’s conversation. Let’s move on today’s main point, which will center on subservicing. To start off today’s interview, I’d like to focus on the challenge COVID-19 has presented to subservicers. As you know, all sectors of the housing industry were impacted by the COVID-19 pandemic. This was especially the case for the subservicing market, which saw increased volumes, pandemic-driven dislocation, capacity constraints, and increased regulatory pressures. It’s now been more than a year since the pandemic first hit. And I’m curious, how has TMS navigated the initial impact of the pandemic and how’s it faired in relation to its competitors?

Jason Kwasny: That’s a really great question. At TMS, you know, we’re laser-focused on the customer, COVID or no COVID. It’s always been a top consideration and the center of decisions and objectives that we focus on here. When it came to COVID, it was really no different. We knew that customers were going to need and depend on their servicer, unlike any time in the past. They were going to be confused, scared, misinformed, etc.

So at TMS, we knew we had to get out in front of that. As such, we focused on three things, and the first of those being proactive education. We wanted to make sure that the customers understood the facts, whether that be around forbearance, how they work, what they are, more importantly, what they’re not, and what will happen during and after the forbearance, what their options would be, the foreclosure moratoriums, etc., basically everything that had to do with COVID as it pertained to the customer and TMS.

So we made sure that we actually pushed that information to our website with banners, FAQs, through our blogs, customer notifications on their web portal, video walkthrough, every way possible to do it digitally because we knew that customers would be out there hunting for it. So we wanted to make it front and center and easy for them to find. In addition, and most importantly, we wanted it in plain language, layman’s terms, and not technical industry jargon. So that way, they could understand it. And we made sure all of our customer-facing agents taking calls were all trained up fully and armed with the same information so that there was consistency should the customer call in with questions.

Secondarily, we focused on communication and availability. I mean, what good are you to a customer if you can’t be there to answer the phone or if it takes an hour to speak to someone? At TMS, we not only scaled up our external hiring extensively, but we immediately moved people from other areas of the organization and cross-trained them to deal with the influx of calls. This is how we’ve been able to keep our average speed of answer well below the MBA averages, since the start of the pandemic.

In addition to that, making sure that we were able to field all the inbound calls, we stepped up our outbound efforts to ensure we were in constant contact with our customers who were in distress. Whether they were in a forbearance or not, when our data told us that they were straying from their normal payment patterns, we would reach out to them immediately to see what the issue was. Was it a blip? Did they need assistance? Are they actually in distress? Whatever, we just wanted to make sure that we had contact with them. And for those customers that were in forbearance, they all got monthly wellness check-Ins from us via phone calls, along with texts, emails, app, web push notifications, with the status of their forbearance, due dates, end dates, the works, really.

And then, finally, we focused on convenience or better known as self-service. A lot of customers just don’t want to speak to you or, quite frankly, they might possibly be ashamed to speak to you about their situation, as we had found. Either way, in either case, they prefer to do it online. So we stood up the ability for customers to essentially get off all that relief digitally. They can go from start to finish by initiating a forbearance, all the way through selecting and completing a proposed forbearance option online.

Customers who were coming close to the end of their forbearance were notified through wellness calls, tax notifications, as I noted before, but they were also directed to a self-service option where they can determine the next steps based on their situation. It was really simple. After answering a series questions, they were presented with options, including extending their forbearance or taking a post-forbearance option, whatever it was that aligned with their situation loan side, investor, or insurer rules. And what we actually found was that 40% of our customers in forbearances chose to go that route. And as a result of us implementing these self-service options, our no-response rate from customers in forbearance plummeted. The collective of all this is that we’ve been able to have lower active forbearance rates and higher exit of forbearance rates than the MBA averages when compared to all lines, whether that be the IMBs, the banks, etc. That really kind of sums up how we tackled COVID here at TMS.

Alcynna Lloyd: That’s excellent customer service, and I’m sure your customers really appreciated all the extra steps you guys took to make sure that they were being served properly. So we briefly touched on it in my previous question, but now, I’d like to focus on subservicing itself and why the market has grown. Over the last few years, the overall market dynamic has shifted as more companies have begun to migrate away from managing their assets internally and instead have chosen a subservicing solution. While the market has grown tremendously, there are still many companies who have yet to transition. Jason, can you share with us some of the benefits of working with a subservicer and why this shouldn’t be an afterthought?

Jason Kwasny: Sure. I mean, it comes down to the age-old question to originators who retained loans: to subservice or to not subservice. And I would say that there’s no one definitive yes or no, and that’s because each originator or investor situation and business model is unique. That said, there are a lot of advantages or reasons for using a subservicer.

First and foremost, as with anything, you generally sub something out because someone else can do it better with less hassle than you can do it yourself. And 9 times out of 10, when it comes to servicing, using a subservicer is worth the cost trade-off. Look, servicing is a very Byzantine business. It’s filled with all sorts of complexities and landmines that most originators either underestimate the effort, cost, and scale needed to operationalize or simply just…they’re just not aware of altogether. Most originators mistakenly think, “How hard can it be? I mean, we know how to answer calls. We just need to take some payments and manage some foreclosure processes along with it. And that’s it.” But I can assure you, it’s far more complex than that. And it gets more challenging by the day as regulations continue to change. And when you mess up, it’s extremely costly.

But the key is to make sure that you have the right subservicer. A competent one, one that can serve as compliantly, one that cares about you as a client, cares about your reputation, and most importantly, cares about and knows how to treat your customers. If you find the right subservicer, then that partnership can actually be very beneficial for you. They can help offset the margin compression, which is critical in today’s environment, by lowering your customer acquisition costs, by increasing your retention with repeat customers, they can increase your ancillary income or present cross-selling opportunities, and in some situations, possibly be an option for early buyouts or MSR sales.

You know, you get a little bit more detailed into those items that I just named off. Let me first start by talking about how the right subservicer can lower your customer acquisition costs, by focusing on repeat customers, as I stated, which is important now more than ever with the rising rate environment. So like anything else in life, all things being equal, people tend to go with what’s familiar and convenient to them. That’s why people go and buy the same brand car for decades, over and over, and usually buy it from the same dealership. In this case, with mortgages, people are more inclined to give you their future purchase or refi business again, unless you, more or less, give them a reason not to. As a subservicer, you accomplish this customer retention by doing the things you know that customers will want.

At The Money Source, we focus on what is not going to change in the next 10 years and have built our business and innovated our technology around that, what we know will be stable. Customers want convenience, usually in the form of self-service. They want someone to pick up the phone fast when they call. They want to get whatever issue they have resolved on one call without having to be transferred around. In short, I mean, they ultimately want a good customer experience. I mean, you’re never going to hear a customer say, “I love you guys, but, man, I’d wish you’d pick up the phone slower, give me some attitude, then transfer me to the next guy, and then ultimately, not solve my problem.” If your subservicer does that to your customers, well, then now, you’ve given them a reason to not be a repeat customer.

On the other hand, at The Money Source, we understand the value in providing a great customer experience and our company is literally designed around it, as I noted before. So we consistently put an effort and investment into it because we know that the energy we put in today will still be paying dividends for our customers and clients 10 years from now. This is how we’ve been able to deliver a 45-second average speed of answer, a 92% one-call resolution rate, a 98% customer satisfaction score, and an 83% net promoter score. And I can tell you, I know of no other servicer with a net promoter score that high. We value the customer. We know that by providing the repeated positive experience, our clients’ customers are more likely to give them their business when it comes time to do another refi or purchase.

Now, for some of the other hidden revenue that the right subservicer can help generate versus your loss mitigation income, if your subservicer’s worth their salt and has a robust and efficient loss mitigation process, along with well-trained and informative single points of contact, then you’ll be able to realize actually more mod income through incentives and redelivery. But the key is you have to have a successful outcome. In the end, when it comes to modifications, successful outcomes really come down to one thing really, first is how quickly you get them into a completed modification. Ideally, if you want the process started no later than 90 days and wrapped up as fast as possible from there, the data shows that the further along in delinquency they are, the less likely they are to complete or even perform on a modification in the long term. So your subservicer must be able to know when it’s the appropriate time to abandon collection efforts and begin the process of carrying the customer’s delinquency through loss mitigation efforts. Sounds easy, but most servicers either start too early, when collections are still the best path forward, or they wait well past the expiration date. By that time, it’s too late.

In addition, servicers tend to have single points of contact models where their SPOCs have competing priorities: collections and loss mitigations. And single point of contacts, or SPOCs, really should be solely focused on being the customer advocate, informing the customer of all their options, helping them navigate through the complex loss mitigation process, informing them of the expectations of both the customer and the servicer, what is still needed, how things will work both during and after the modification process. And they have to do all of this with a level of alacrity. And then with all things today, you want the customers to be able to navigate this process as conveniently as possible. Usually through digital means, such as the ability to e-sign, upload documents, get push and text alerts, self-service on the web or app, you know, all the good stuff that originators have. Well, we have all that at TMS.

Plus from a cost perspective, once the customer’s current, they start making payments, which lowers the cost of the master servicer or the originator, and reduces the advances and expenses once they’re current. The end result is more income, minimization of loss, less advances and expenses to be paid. And more importantly, the loss of a potential repeat customer through foreclosure.

Now your “right” servicer can help with cross-selling opportunities such as insurance, but they got to know how to isolate the right customer and when. For example, at TMS, we know when a policy is coming due. We know which customers are ripe to be offered or suggested to get a new policy, so we systematically present it to our trained customer-facing agents. So that when they speak to the customers, they can present that opportunity to them. Same with refi opportunities.

At TMS, we know if a customer is coming to adjust or if the rate is higher than the refi market rate. We know if they’re carrying private mortgage insurance, we know their FICA with pay history so we can triangulate which customers and when to try and pitch a refi or savings opportunity. Again, this goes back to repeat customer. If the subservicer has built that goodwill through great customer experience, engaged with them on successful cross-selling in the past, they can leverage that at the right time to convert the customer into a repeat, right? Because if they don’t, someone else will, and then you’ve lost a customer, and it’s much harder for someone to come in and get them, when your customer is, for a lack of a better term, in the ecosystem, because you’ve already transacted with them on so many successes and positive experiences.

Finally, I just wanted to touch briefly on using your subservicer as a partner in early buyouts and MSR purchases. You know, a lot of subservicers aren’t in the MSR purchase business, but if you have one that is, or has a partnership on the platform, you now have more buyers in the mix that already have an interest in the portfolio. Plus doing an ownership transfer versus a servicing transfer means there’s no disruption to the customer. And I know that price is usually the biggest factor when it comes to this stuff, why not have a relationship with a subservicer who can be another option for you, and one that impacts your customers the least? In this case, more is more.

As far as early buyouts go, our concern with Ginnie Mae, when a loan goes 90 days delinquent, the economics of that loan change. They turn upside down, really. You go from owning an asset, with net revenue, to a liability, usually with a net loss. Your interest you collect has stopped, your expenses and advances required for that loan increase, your cost to pay the subservicer to service that loan also increases. Basically, it turns into a losing proposition. However, Ginnie Mae allows you to option to buy them out, buy it out of the pool at 90 days. Most independent mortgage bankers don’t because it eats into their capital. So they take the monthly loss. But if your subservicer participates in EBOs or has partners on their platform who does, like TMS, and that gives you the option to stop bleeding. Stop the bleeding, so to speak. And keep your portfolio of delinquencies low, which is always a good thing.

And I know, look, I know all of this that I just said was a mouthful, but it’s just the tip of the iceberg of why using a subservicer, more specifically, the right subservicer can be beneficial. But I can really sum it up like this. Every business should play to its strengths. Do what you know and what you can do best. For originators, that’s originating. So focus on leaving the headaches of servicing your loans to the pros, with the caveat, of course, making sure it’s the right pro, in my case, like TMS.

Alcynna Lloyd: I like what you said about doing what you know and doing it best, which brings me to our next question, which asks, how did TMS subservicing become one of the nation’s top 10 of subservicers? What factors not only contribute to a successful business, but also a healthy working environment?

Jason Kwasny: Well, I mean, everything I just stated above, TMS does, which is precisely why TMS has grown to be one of the nation’s top 10 subservicers. Our clients have found that partnering with us has been mutually beneficial. We make it easy for them, from boarding all the way through REO, we got you covered. I mean, we know what we do and we know how to get it done.

On top of that, through the use of our cutting-edge SIME platform, which makes surveillance of your portfolio easy and provides it in real-time, we’re actually a rare breed in our industry, a unicorn, some might say, which happens to be our mascot, in that we are 100% fully transparent organization. With SIME, all the data we have access to, you do also, as a client. Customer information to call recordings, to reporting, to performance, it’s all there in real with the click of a button. And best part, you don’t need to know how to use MSP to get it. No old-fashioned green screens, just a web-based portal for you to see and do whatever it is you need to do to ensure that things are running as expected. We actually like to say that if you’re up early enough in the morning, you might catch a mistake that we make before we actually do.

And our clients actually appreciate the ease of use and level of transparency. It builds that trust, that confidence in the relationship, and that’s that level of trust and transparency and service that we provide to them and their customers that makes them happy to be business partners with us. And when they’re happy with the service we’re providing, they tell their originator buddies, and then, they tell theirs, and so on, and after enough of that, you end up being one of the nation’s largest subservicers.

Alcynna Lloyd: I imagine that’s a great place to be.

Jason Kwasny: It is. It is.

Alcynna Lloyd: Jason, before we wrap today, do you think there’s anything our listeners need to know about you, TMS, or subservicing?

Jason Kwasny: Yeah. Let me just say that if you’re considering servicing your own loans, all I got to say is make sure you spend the appropriate amount of time to understand the effort, the cost, and the scale needed to not only stand it up but to operate compliantly, and to do this all while keeping your customers happy. I can assure you, it’s not an easy thing to do. And if you come to the conclusion that you do want to subservice, make sure that you find the right partner. It has to be one that is a match to your core values and brand. If it’s not, it’s never going to work in the long run.

In addition, they have to be the one that can deliver on what they say and say, whoever you’re entertaining to be your subservicer, make them actually prove it. Don’t just send them a questionnaire and rely on that and assume everything is hunky dory. Have them provide you the real-time data to back up their claims. Most importantly, go see their operation in action. We’re deep enough in COVID now that you can skip the Zoom presentation and go and see and feel their culture. See if what they told you on paper is what you feel in the office. Look at their employees’ faces. Are they happy to be there? Do they have smiles on their faces? Because if they don’t, then you can only guess what level of service your customers will be getting. And that means you can expect to be receiving complaints and worst of all, you’ll lose them as repeat business and potentially your reputation in the process.

So ultimately, if you’re in the market, you know, give TMS a look, heck, or give me a call. I can assure you that you will not be disappointed. We have the receipts, as I like to say. We have the technology, the transparency, the performance, the industry-leading level of service you want for your customers. There’s no doubt we will present a compelling value proposition and the solid return on your investment,

Alcynna Lloyd: Right, I really like that you guys do have receipts. That’s great. Well, Jason, I’d like to say thank you for joining “HousingWire Daily.”

Jason Kwasny: Oh, it’s been my pleasure. Thank you for having me.

Alcynna Lloyd: Of course. Listeners, we’ll see you back here tomorrow, and thank you.