Tom Millon, CMB, of Computershare on Technology and Building Efficiencies
(Originally published Apr. 20)
Tom Millon, CMB, serves as CEO of Computershare Loan Services US, Ponte Vedra Beach, Fla., including Specialized Loan Servicing, Credit Risk Solutions, Capital Markets Cooperative, LenderLive Network and Property Solutions. He founded Capital Markets Cooperative in 2003 and is a recognized author, frequent speaker and expert in mortgage finance.
Millon is a member of the Mortgage Bankers Association and serves on its committee for GSE reform. He is also on the advisory board of the Common Securitization Platform—a joint venture between Fannie Mae and Freddie Mac, dedicated to standardizing the agency mortgage-backed security. He holds the Chartered Financial Analyst (CFA) and Certified Mortgage Banker (CMB) designations.
MBA NEWSLINK: From the origination standpoint, what are the biggest mistakes lenders make in trying to effectively process loans to closing?
TOM MILLON, COMPUTERSHARE: The loan process can be inefficient. Some loan originators have retained traditional, paper-laden methods of processing, either in whole or in part. This can increase the chance of missing information, leading to delays and additional risks.
Additionally, some lenders don’t always ask the right questions at the beginning of the process. This can lead to missing documentation, whether it’s W2s, pay stubs or other information and incomplete applications. As a result, they are sometimes prevented from being able to make effective credit assessments, and the choices available to borrowers decrease, particularly as standard agency, non-qualified, FHA and other types of mortgages require specific and extensive information in order to gain approval. Our own figures show that 55% of non-QM applications most likely failed as a result of falling short of credit criteria, and 22% of those failed applications simply did not include all of the required information.
We have now automated the majority of the loan process. By reducing reliance on manual procedures and digitizing the transfer of information, lenders reduce the chances of incomplete applications — and increase a customer’s chances of borrowing. Applications can move seamlessly from the initial application process to the final approval stage. The entire process can be completed in days or even hours. Beyond this, data validation technology enables lenders to obtain information directly from sources such as banks, the IRS, employers and others, which can help prevent fraud. All of this helps ensure that the borrower’s experience easy, effective and excellent.
NEWSLINK: The cost of producing a typical mortgage loan has almost doubled since 2008, according to the Mortgage Bankers Association. What can lenders do to reduce costs and achieve the best margins on their loans?
MILLON: Technology is the game changer for reducing costs and achieving the best margins. Administration is dramatically reduced by automating borrower data collection and the automatic population of forms. Third-party data validation solutions also help maintain data compliance, reducing the likelihood of fraud and increasing productivity. Predictive analytics provide multiple ways to improve underwriting — from borrower loan classification to default modelling.
Process automation also dramatically reduces the time underwriters spend on administration. Traditionally, underwriters could prepare an average of two loans a day. New technology applications mean they can now process as many as six to eight loans a day on average. The greater volume increases profitability and lenders have the opportunity to reduce customer fees without affecting margins.
The second area where technology has a profound effect on cost is appraisals. Technology allows inspectors to send reliable information to appraisers, supporting the industry’s move to bifurcation. In turn, valuation reports will take approximately 30 minutes on average to complete rather than the half or whole day they took before bifurcation. More efficient processes and higher volumes mean lower fees and better margins for all.
NEWSLINK: How important is the borrower experience in special servicing and what steps can companies take to improve it?
MILLON: The foundation of strong special servicing is to provide a comprehensive customer experience. The customer — in this case the borrower — is paramount. We look at customer care as one long dialog, beginning with our first engagement. Laying a foundation of trust through proactive engagement and transparency is critical to being able to meet both customer needs and client performance expectations. A continuous feedback loop provides us with invaluable insight that can help us change and improve.
And, of course, the use of data and predictive analytics during the lifecycle of a borrower plays an important role through every step of their journey. We can predict a number of outcomes, including the chances of default, and make strategic decisions on how to support borrowers.
NEWSLINK: How can lenders use technology to analyze risk?
MILLON: Reliable data and predictive analytics are key to analyzing risk. At Computershare, we are able to predict, detect assess and manage defaults better and more quickly as a result of the technology we use. We can mitigate both early and late stage defaults and proactively offer borrowers loss mitigation solutions.
The one main risk factor for lenders or any industry is data accuracy and reliability. Even with all the automation and AI in the world, if your data sets are wrong, risk increases. Data validation services as well as optical character recognition are two key technologies in the underwriting process that prevent and nearly eliminate risk. OCR technology ‘reads’ and reviews documents – such as forms, financial information or records – creating a reliable, standard review process. This eliminates what we call ‘manual variability’ – when the process goes through too many hands and data can become unreliable.
Fannie and Freddie’s approach to technology in underwriting seems to have become the new norm in our industry. Computershare Loan Services’ technology platform is robust and developed with an eye towards the future.
NEWSLINK: What role do you perceive special servicers playing in the near future?
MILLON: In the near term, special servicers will continue to assist financial institutions with servicing default loans. We also assist in higher credit risk assets such as non-qualified mortgages and FHA servicing. In fact, we’re a Tier 1 FHA servicer: last year, Computershare Loan Services Specialized Loan Servicing received this designation from the U.S. Department of Housing and Urban Development.
We have always invested heavily in the default loan and government servicing aspects of our business alongside our performing assets. Through our early stage onboarding and loss mitigation technology, Computershare Loan Services is positioned to assist the market in the event of a downturn across multiple asset classes. Our technology platform is nimble and can adapt quickly to changing market conditions.
Clearly the pandemic that the world is currently experiencing is unprecedented, and there are likely to be significant and long-term effects for both lenders and borrowers. As ever, we’ll be ready to provide clients with the services they need – as well as support borrowers that are in need.
NEWSLINK: In the last few years, Computershare Loan Services has acquired and assimilated several companies around the world. Collectively, how do banks benefit?
MILLON: In 2016 Computershare Loan Services brought together some of the industry’s leading service providers on both sides of the Atlantic to create a leading, international end-to-end third-party mortgage services provider that administers over $100 billion of assets globally.
Banks, originators, investors and other clients can all benefit from a full breadth of services under our ‘one-stop shop’ model. We have decades of experience and a high level of expertise within our four business units, including residential mortgage servicing for financial and investment banking industries, secondary marketing services, origination and fulfilment as well as asset valuation and management.
Banks have taken a particular interest in our outsourced mortgage origination services owing to the growing costs of compliance and the volume in the last few years. Our outsourced mortgage origination services provide excellent, onshore customer service, streamlined mortgage methods using intelligent automation and our ability to process large volumes of data while stringently adhering to regulatory compliance. Through our special loan servicing, banks are most interested in our ability to predict and manage default including the sensitivity exhibited towards borrowers during a period of great stress.
Computershare Loan Services is part of Computershare Group, a global financial services company. We can easily and quickly take the latest developments from around the world and apply them to work in the U.S. mortgage industry.
(Views expressed in this article do not necessarily reflect policy of the Mortgage Bankers Association, nor do they connote an MBA endorsement of a specific company, product or service. MBA NewsLink welcomes your submissions. Inquiries can be sent to Mike Sorohan, editor, at firstname.lastname@example.org; or Michael Tucker, editorial manager, at email@example.com.)