Facing a Climate of Disruption

Will You Be Ready for What’s Next in Mortgage Servicing?

By Lori J. Pinto, CMB Cenlar FSB

In contrast to the upheaval of the pandemic and the volatility of the last several months, we could easily recast the pre-pandemic months and years as a period of constancy, if not relative tranquility. But a true picture of American life over the last two decades is anything but placid.

That’s especially so for credit union members and all of you in the mortgage industry. Recent years have been punctuated by great waves of disruption — from the Great Recession to billion-dollar weather and climate disasters. Conducting business and caring for members in periods of disruption can be challenging. Will you be ready for what’s next?

Here are some things to think about that may influence your mortgage servicing plan.

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• Portfolio Purchase Programs – Retail, Independent Mortgage Bankers/Builders

• Expand Your Product Line – Construction, ARMs (both SOFR & Treasury), FHA & VA, Jumbos, and more!

• Exceptional Credit Union & Member Satisfaction Ratings

• Customizable Servicing Solutions

AN ENVIRONMENT OF HIGH INTEREST RATES, ALTERNATIVE PRODUCTS AND REGULATORY RESPONSIVENESS

Interest rates are climbing. In Q4 2022 alone, we saw rates hit 7.5%. It’s becoming more challenging to originate new loans. On top of that, inventory is limited, as most people want to hold on to the equity in their homes as values rise. To stay competitive in the marketplace, credit unions are putting their best efforts toward other product offerings like adjustable-rate mortgage loans, manufactured loans and buydowns.

While credit unions look to promote alternative products, there is also the scrutiny of an ever-changing regulatory environment. So while you may be focusing on how to market alternative products to your members, partnering with a subservicer that has the expertise to manage the regulatory and compliance requirements may be critical factor to your credit union’s continued success.

Each time new laws, regulations or programs are put in place, a servicer must first determine their impact and then design how to implement them. This includes creating procedures, testing, and quality controls, while at the same time communicating those changes to business partners, members and affected operational areas.

At Cenlar, for example, we have a formal process that entails working with our legal regulatory attorneys to understand the requirements and provide interpretation of the change to our compliance team. The team then works with operations and business control managers to understand the impact to business processes and procedures, training, communications, vendors and systems. The process allows us to be prepared and better able to take action.

DELIVERING AN EXCELLENT MEMBER EXPERIENCE

The credit union member has an expectation that their mortgage servicer, whether subserviced or not, will deliver an experience to meet their individual needs. That means leveraging the servicer to engage with members over time to establish relationships and learn their preference for communicating. Whether through the regular cycle of onboarding, escrow, monthly payments and year-end or extraordinary challenges facing members like the pandemic and natural disasters, providing responsive, anticipatory and always-caring service is a necessity. Look to mortgage subservicers to leverage data and analytics to determine what tools are needed to obtain the best communication experience for each member. For this reason, subservicers are investing in technology, such as bots, automation and artificial intelligence (AI) to enhance the customer experience.

Natural Disaster Readiness When it comes to natural disasters credit unions and other financial institutions play a critical role in helping communities with both preparedness and recovery. Make certain you as a servicer or your subservicer has a solid disaster playbook, and be sure your own is up-to-date. Remember to think creatively. Lean into your plan but be ready to pivot and address unforeseen needs. Be demonstrative in how you communicate with your members by reaching out before, during and after a disaster occurs. Expect the same from your subservicer. Provide resources to help, including how to get in touch with you and others, including government and relief agencies.

Managing Default

As we move from a post-pandemic environment and into a recessionary one, credit unions will need servicing expertise to manage the loss mitigation process. Pandemic-related forbearance is ending for many, however, individuals may still need financial assistance. A servicer needs to understand the many diverse programs put in place by the government-sponsored enterprises to help members with workout efforts. That’s why a subservicer can play a key role in your overall business plan for your mortgage business. Additionally, subservicers should have a good pulse on the market and be prepared to handle upticks in delinquencies as the market evolves. As important is a subservicer’s commitment to making sure that all available options to keep members in their homes are explored.

With all of these considerations, preparing for what’s next may seem daunting, but with the right partner you can create a plan that best serves you and your members.

Lori J. Pinto is the Senior Vice President of Business Development at Cenlar. She has more than 35 years of experience in the mortgage banking industry.