Time For Change, A Paradigm Shift Is Evident
By Nancy Alley, VP, Product Management, Wave Systems Corp.
Nancy Alley
At last month’s Mortgage Bankers Association Servicing Conference, a paradigm shift was apparent. Gone are the days where loan servicing was a necessary byproduct of the mortgage origination machine. With almost 10% of all outstanding mortgage debt currently past due and nearly 27% of mortgages underwater, the numbers are ominous and not expected to improve. Loan servicing is now the industry’s focus as all the world’s eyes look for a solution to America’s housing crisis.
And, the timing of the conference felt prescient. As conference attendees and exhibitors buzzed about default servicing, loss mitigation strategies and “cash for keys,” President Obama simultaneously presented his Homeowner Stability Initiative. He gave a speech in Phoenix promising up to nine million Americans hope of refinancing their underwater mortgages or modifying their payments to 31% of their income or delaying foreclosure.
So what does this mean for mortgage technology? Does technology have a role in crafting an industry response to these dire times? Or, are the issues at hand so pressing that technology initiatives will suffer due to lack of resources and shifting priorities? One would hope not. As Elbert Einstein once said, “We can't solve problems by using the same kind of thinking we used when we created them.” Now is the time to change our thinking.
The challenge will be two-fold. First, we must identify technology applications that can be implemented quickly and inexpensively to provide immediate solutions to our servicing problems. The crisis is here now and won’t wait for long implementation lead times. However, we still need to implement solutions that can have long-term impact for the entire industry value chain. Yes, we need the impossible: the sustainable quick fix at lower cost.
Technology can drive much efficiency in the Servicing workflow. For example, we need to eliminate data re-entry into disparate systems and manual entry of escrow information as well as automate the quality control and reporting functions. These are important initiatives as they will provide a sustainable advantage over time. However, integrating systems and data are not typically “quick hit” successes and could potentially drain already over-taxed organization resources. While these projects should be considered as part of a servicer’s long-term technology strategy, they may not provide the short-term boost of innovation and financial payback the industry is in search of.
So where do we start? One could argue that the servicing sector could borrow a lesson learned from the origination community as it relates to e-mortgages. The origination community began its quest for e-mortgages almost a decade ago and the adoption has been slow but building. Between December 2007 and now, MERS e-note registrations grew from 510 to almost 70,000 despite the industry’s difficulties. And, as originators waited for full e-mortgage adoption, they began to acclimate their borrowers to electronic documents and signatures via e-disclosures. Over the past few years, borrowers flocked to the concept of e-delivery and e-signature of mortgage disclosures. Borrowers are comfortable with the process and online technologies. The solution has been a win-win for both borrower and originator. Early statistics suggest borrowers would enthusiastically embrace e-modifications. Borrower drop-out between committing to a modification plan and signing the paperwork is historically high. By presenting the borrower with the paperwork online and immediately securing an electronic signature, with the agent potentially still on the phone, cycle times can be reduced and more modifications successfully completed. Furthermore, these same solutions can easily be replicated and promulgated throughout the mortgage food chain, making the technology bear fruit long-term. Considering that the top five servicers now control 67% of all housing debt, a cooperative approach and philosophy, as it relates to e-modifications, could quickly transform an industry.
So how do we do this quickly? The technology exists and is waiting to be leveraged. Many of the mortgage origination platforms, portals and document service providers have already integrated with e-sign vendors and provide hosted services. Thus, even outsourced loss mitigation and default management providers could easily integrate on behalf of servicers. Furthermore, by leveraging these transactional models, servicers and loss mitigation providers would still have situational flexibility and be able to determine on a per-loan basis when to go “e.”
President Obama himself has dangled the innovation carrot in the form of two billion dollars in competitive grants for those communities that “are bringing together stakeholders and testing new and innovative ways to prevent foreclosures.” An interesting twist would be for servicers to work with the hardest hit communities to present a solution that leverages technology to get the right default management solutions to Borrowers sooner and consummate workouts faster. E-modifications are just one example of how technology can help. Communities could support the effort with free and secure access to computers and the Internet as well as endorsing the security of the proposed solution.
Time is of the essence and the challenge is out there to look at available technologies and begin to change the way we think. Despite the turmoil of our times, let’s not lose our focus or optimism. According to the great dissenter Oliver Wendell Holmes, “The great thing in this world is not so much where we are, but in what direction we are moving." Let’s use technology to get there faster.
Nancy Alley leads Product Management for Wave Systems’ eSign Transaction Management Suite. The company can be found on the Web at www.esignsystems.com. Prior to Wave Systems, Ms. Alley was a co-founder of SignOnline, Inc. and was the company's Chief Information Officer. Wave acquired SignOnline in 2001. At SignOnline, Ms. Alley was responsible for designing, developing and implementing the eSign Transaction Management Suite.
