What are the key issues that will impact the mortgage servicing industry in 2018? Some trends, like continued compliance pressure and rising costs, are well documented. But there are other concerns that should be high on the list for servicing executives — and the investors that work with them.
These are the key issues that I and members of my team expect to be discussing with servicers and investors at the 2018 conferences. I welcome your feedback or, better, the chance to visit with you at one of the upcoming meetings.
Here is my list of top issues for mortgage servicers in 2018:
1. The rise of the servicer as the best point of contact.
Single Point of Contact was a big change for most servicers and it forced the industry to change the way it interacts with mortgage borrowers. Services have successfully navigated past that hurdle and now find themselves in an interesting position. By forcing the servicing industry to provide for a personal contact with home loan consumers, regulators drove the industry toward creating systems and processes that now allow them to interact with borrowers in a more personal way. This is important during delinquency and default, which was the regulator’s primary focus, but it also gives servicers the power to be the best point of contact for preventing portfolio runoff and for providing hot leads to their partners on the loan origination side. As regulators continue to drive the industry toward a more personal relationship with borrowers, the more powerful servicers become because they own that relationship.
2. Property preservation moves out of the default servicing space.
During the downturn, when millions of properties across the country went into foreclosure and then became the responsibility of the nation’s servicers, property preservation grew beyond simple field services into an industry in its own right. As the economy has improved and the housing industry has returned to more normal levels, many expected property preservation to shrink. That’s not what happened, primarily because of the many natural disasters we have experienced over the past few years. Some blame global warming for disrupting weather patterns. Whatever the cause, wildfires, floods and hurricanes devastated huge swaths of real estate last year. Servicers are now working with their property preservation professionals to handle insurance claims and, in some cases, managing construction crews to repair the damage.
3. The quickly changing expectations of the American consumer.
Because consumers lack the power to switch servicers once their loan has been boarded, many in the industry have discounted changes in consumer expectations and new levels of accountability. Now that consumers can complain easily to government regulators, more servicers are working to stay informed and meet consumer concerns where possible. In general, consumers are less patient today and more likely to complain if they feel they are not being heard. They have also embraced voice-activated personal assistants and that could impact how they choose to interact with their business partners. Perhaps we gave up on out Interactive Voice Response (IVR) systems too quickly. Today’s chatbots look very much like the IVRs we used in our call centers 15 years ago.
4. The return of the home equity business is an opportunity for servicers.
Most experts now predict more increases in interest rates this year, which will further decrease the refinance business. Most lenders will work to make up that loss by capturing more purchase money business, but some will return to a focus on home equity lending. American consumers will still need access to capital, but with no benefit to a cash out refinance, they will turn to home equity loans. Even a change in the tax law will not drive consumers away from this affordable option. Servicers are in a position to know first when a borrower is interested in such a loan because they own the relationship. This is a huge opportunity.
5. An uneven recovery requires attention be paid to collateral values.
The industry is recovering and with it the economy as a whole, but the recovery has been uneven. I have spoken about this in my monthly Residential Real Estate Market Overview Reports, which are available on our website. Today, with property values rising across the country and with the negative impact that storms and natural disasters have had on the nation’s housing supply, it’s more important than ever to know what’s going on with the value of the real estate in your portfolios. Fortunately, it is more affordable than ever to value a portfolio of loans and we expect to be providing this to more servicers in 2018.
To discuss any of these issues or other issues you find critical in 2018, please call on me. For more information about the data behind my commentary, see our website. To schedule a meeting at an upcoming conference, please call my office at 847-242-9955.