Dealing with challenges in default management and loan servicing
May 1, 2018

The growth of technology has meant a change to the servicing of loans as well as default management. Unlike the past when tasks required the borrower to go for a one-on one meeting with the lender or at least call them, it is now possible to carry these tasks remotely using web portals and mobile apps.  With the diminishing need of human contact, there is an increase in the borrowing expectations. This means that the increase in compliance changes requires a new approach to the default management and loan servicing. This has led to the rise of the national default servicing.                       

Servicers regularly find themselves in a predicament that requires them to find a good way of managing the expectations of the borrower while at the same time ensuring compliance. The goal of this article is to discuss the key challenges in default management and loan servicing. The article also looks at the technological solutions that can help the servicers to overcome the challenges by streamlining the processes, decreasing the costs and discovering the new sources of revenue even as they ensure compliance in the lifecycle of the lending.

Loan margins reduced by compliance standards

With the regulatory changes that are regularly coming in, default management and servicing has become an increasing challenge. This means that the providers of mortgage services are searching for additional staff in compliance and the shifting focuses on the performance of the third-party vendors. Even though there is need for compliance in the protection of the rights of the homeowners, the services are regularly seeking for ways in which they make profit even as they meet the marketplace’s increasing demand.

Creating proof of written documents and their delivery

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A lot of regulations out there are meant to ensure that the provider of the loan maintains records of the documents they created and that they delivered them. With the continued changing of the compliance regulations, there is an increase in the challenges associated with compliance with the relevant laws. There are several factors contributing to the challenges of delivering all the complaint documents. These include the variations of the different states, the huge number of communications for borrowers and the methods of deliveries. To deal with this challenge, there is a development of a wide range of communication apps that can assist in achieving a portfolio that is more balanced.

Online archiving of documents

It is important for services to have one access point to the documents of the borrowers, both online and print. These should be able to service both the borrower and the CSR. There are two benefits of this:

  • Borrowers get one access point to the online documents. This ensures that it is easy to view the cycle of their loan at any given point. This can serve to reduce the volume of the call centers.
  • When a borrower reaches out to the call center with a question on one of their documents, CSRs get access to an exact document and can answer questions faster. This can reduce the call time costs.

Another solution is the provision of technological data that is driven by technology. This can shift from novelty to standard. Even though there is still need for print documents in delivery of the key data of the borrower, there is need to consider the expectations of the younger borrowers in terms of how they receive and even respond to the data. When borrowers are provided with an option of receiving documents via email and the ability to log in and access their information from a PC or mobile document, they will get encouraged to not only open the documents but also respond in the right manner.

Since the internal servicing of a mortgage can be challenging, the national default servicing can make the process easier by coordinating the activities of trustees, attorneys and the real estate agents.

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