Servicing Leaders: Human Element Still Crucial to Sector

DALLAS–Technology is rapidly changing the servicing sector, but the human element remains as important as ever, analysts said here at the Mortgage Bankers Association’s Commercial/Multifamily Servicing and Technology Conference. 

Mark McCool, President of Berkadia Commercial Real Estate Services, New York, called technology a useful tool, “but it never replaces the need to understand markets,” he said. “Our clients and investors need us to understand their market and nothing replaces contacting our production officers and asking them for color about a particular area.” 

McCool said Berkadia operates 63 offices across the country, “and we leverage those resources frequently. We use technology to make us more efficient so we can spend more time looking at individual markets and get good color,” he said. 

Ellen Miller, Managing Director of Servicing with Berkeley Point Capital, Bethesda, Md., agreed, noting that Berkeley Point subscribes to tools to track markets but also has asset management offices throughout the country, “so we have people in local markets.” 

“This first and foremost has always been a relationship business,” McCool said. He noted that as Berkadia hires more Millennials born between the early 1980s and 2000, it looks for those who can communicate with clients in the manner the client prefers. “We won’t force investors or borrowers to change in order to communicate with our employees; our employees need to be able to communicate with them. We have technology, but nothing will replace he spoken word.” 

Mike Heagerty, Principal with Newmark Realty Capital, San Francisco, said technology allows his firm to retain valuable staffers who might have departed in a different era. “We have two mothers on staff who work part time. They worked full time for several years, then had children and now stay on in part-time rolls. You can’t get that sort of experience just off the street. They have flexibility so that when their kids come home from school they are off the computer and into their other job.” 

Heagerty noted that some Newmark employees work 10-hour days Monday through Thursday then take Fridays off. “As long as the Internet follows them, so do we,” he said.

Looking ahead, panelists agreed that interest rates will soon change, and that can have both positive and negative consequences. “It’s interesting. We need to remember where we are in terms of interest rates and the impact that global economics has on our business,” said Brad Hauger, Senior Vice President and Servicing Director with Midland Loan Services, Overland Park, Kansas. “As some higher coupon notes mature, that makes it easy to refinance and perhaps take some cash. Also, if they should get into trouble, it’s easier to work them out if there is positive cash flow.”

Hauger noted that borrowers and lenders started anticipating rate changes in third-quarter 2015. “We saw a significant increase in defeasance volume at that point,” he said. “That has somewhat subsided since then, but you can expect it to pick up as indicators show that the Fed will increase rates.” 

But Hauger said a nominal increase in interest rates will not stress commercial borrowers for some time. “And as rates rise, that’s an indication that the economy is stabilizing and things are improving,” he said. 

Miller noted that a portion of servicers’ revenue comes from receiving interest on escrows and reserves, “so an increase in that will definitely give our business a boost,” she said. “I think what we see is borrowers looking at things in both ways. Many are refinancing; we continue to see interest rate reductions on HUD loans in our portfolio. We’ve also seen some borrowers with adjustable-rate mortgages loans convert to fixed-rate loans in anticipation that rates will soon go up.”