The more you cook, the easier it becomes to throw together meals without referencing a recipe. Part of it is the repetition, but there are dozens of other things you become proficient in that help you become a skilled home chef without even realizing it.
Your knife skills improve, and prep time decreases. You begin to understand why you add the ingredients to the pan in a particular order and how long to cook them. Your flavor palate evolves, and you learn what seasonings pair well together.
In business, the idea is the same. Management streamlines processes, increases team efficiencies, and costs go down. When costs go down, profit margins go up, and there’s more money for company growth.
While the simple formula of; efficiency + performance = profit might sound simple, for some industries, it’s easier said than done. As the consumer demand for digital accessibility becomes the drumbeat for virtually every industry, those who choose not to evolve technologically struggle to increase profit margins.
Mortgage servicing has unfortunately found itself in this position. It’s a noble industry that works tirelessly to manage the wealth behind all of our most valuable assets—our homes. And, despite what many might believe, work even harder to keep us out of foreclosure in times of financial hardship. An industry valued in the billions, yet because of outdated systems, Servicing organizations leave a large portion of that on the table.
With Brace, mortgage servicers have an opportunity to move away from disparate legacy systems and processes and implement a consumer-led, end-to-end servicing platform. By doing so, Servicers can increase efficiency and performance and set and track new success metrics (KPIs) to keep their organizations on the path toward growth.
Market fluctuations have launched mortgage servicing into the spotlight, with lenders and investors alike emphasizing increased servicing margins. With the help of a connected digital infrastructure, Servicers can streamline operations without a massive investment in human capital. More efficient operations help portfolios perform, giving Servicers increased revenue.
When systems are made more efficient, costs naturally decrease. These cost savings can come in handy when annual budgets get restructured. Thanks to advancements in digital technology, Servicers who take steps to implement a digital servicing infrastructure can see increased yearly budget savings through the following operational efficiencies.
Here are what proactive servicers should be working toward to maximize efficiency and performance.
When mortgage servicing systems aren’t designed with regulatory or market flexibility in mind, market fluctuations can leave Servicers scrambling to find quick fixes that ultimately drive up costs. Removing disparate systems is the first step in increasing efficiency and performance.
If Servicers are utilizing third-party compliance companies to help with loss mitigation workouts, that’s a significant chunk of their overall operational costs. Digital tools, like a decisioning Rules Engine that automatically generates compliant loss mitigation solutions with every data input from the homeowner or Servicer, can completely cut out the need for third-party compliance teams.
Valuing employees means challenging them to be the best they can be. While stuffing envelopes and sorting mail is the nature of the Servicing beast, it doesn’t have to be the full scope of someone’s job description. Digitization helps scale and train employees to have a higher quality output, thereby increasing overall productivity and performance.
With a digital infrastructure, Servicers can train more employees at once while monitoring and managing their workloads. This greatly reduces the time and money needed to scale employees, allowing management to redistribute a healthy portion of the training budget.
The economic and environmental costs of paper mail are vast. While we’re a long way from completely eliminating the need for paper mail, digital tools are available to reduce the volume of paper used dramatically. High-volume servicers can see mail-room associated costs reduced by millions of dollars.
There’s nothing better than being rewarded for hard work. There’s no question that a Servicer’s efforts to make operations more efficient will help keep an investor’s portfolio healthy and performant. Most investors are willing to pay additional compensation for this in the form of performance incentives.
Let’s say you’ve done away with your legacy servicing systems and made the shift to a digital infrastructure. Now, what should your organization be tracking with your new technology to help you become (and remain) the most efficient and performant mortgage servicer you can be? The following are some KPIs that will ensure your organization goes from reactive to proactive and stays that way.
Below are three success metrics (KPIs) that can help the overall performance of Servicer portfolios.
Monitor Payment Slippage Rates
It would be beneficial for Servicers to monitor payment slippage rates. Payment slippage rates should be defined by managers with the goal in mind to reduce delinquency risk. Flagging accounts with payment inconsistencies (whether payments are a few days later than normal or consistently missing the grace period), can give Servicers insight into default risk. When a homeowner account accumulates many payment slippage alerts, Servicers can reach out digitally to let them know that assistance is available should they need it. This type of proactive monitoring can capture loans before they enter into default, dramatically lowering delinquency rates.
Decreasing Overall Number of Delinquencies
Every servicer knows that the cost of servicing a non-performing loan (NPL) is much higher than a performing loan (PL). Decreasing the number of NPLs lowers costs, increasing revenue.
Decreasing Overall Timeliness of Delinquent Accounts (Rates < 30-Day Goal)
Keeping delinquency rates from rolling over from 30 days to 60 to 90 and ultimately out of foreclosure is a constant battle for servicers. With the proper performance monitoring tools (digital), hedging the number of days loans are in delinquency becomes possible.
Call centers are a significant expense for mortgage servicers, most of which come from the payroll costs. Whether or not Servicers utilize traditional call centers or hybrid remote workers, enough workers are necessary to process high volumes of customer calls. Other costs under this category include phone lines, computers, and other employee workspace necessities.
Constantly working to reduce communication costs should be a priority for Servicers. Servicers can reach their cost reduction benchmarks and adjust them as technological advancements occur through digitization. Costs to reduce include:
Instead of waiting weeks for a response through the mail or trying to reach homeowners by phone, information requests or modification approvals can be sent digitally. If consumers are given more communication options and allowed to select a preference, the likelihood of establishing quality right party contact (QRPC) increases significantly—allowing Servicers to increase QRPC benchmarks.
Digital work tracking capabilities allow managers to see the number of files serviced on a given day, the types of workouts offered, and the number of closed files. Through digitization, Servicers can instantly determine the quality of their team’s output, not just the quantity of work performed. So, instead of calls, the new measure of workforce efficiency can be measured in loans worked or Loans Per Employee (LPE).
There are many aspects to the Brace Default Management Platform 2.0 that helps Servicers increase and track performance and efficiency.
Download the Brace ebook: Proactive Mortgage Servicing KPIs to learn how a connected infrastructure can improve Servicer success in all areas.