Sponsored Content from FICS: Mortgage Servicing Software: The Key to Servicing Retention

Susan Graham is president and chief operating officer of FICS® (Financial Industry Computer Systems, Inc.), a mortgage-software company specializing in mortgage origination, residential mortgage servicing and commercial mortgage servicing software for mortgage lenders, banks and credit unions. FICS has delivered exceptional automation, performance, system support, and value for more than three decades. Customers save money through a low initial investment, fixed and controllable costs and enhanced productivity. FICS’ software uses Microsoft .NET Framework and provides document management and web-based capabilities as well as the flexibility to choose an in-house or cloud hosting solution. Visit www.fics.com.

Susan Graham

Rising property values and low interest rates pushed mortgage loan origination volume to roughly $4 trillion in 2021, the highest level ever recorded. Since then, rising inflation and interest rates have curtailed loan applications — particularly refinances. The 30-year fixed mortgage rate hit the 6 percent mark for the first time since 2008, rising to 6.01 percent on September 15, 2022. “Higher mortgage rates have pushed refinance activity down more than 80 percent from last year,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist.

Servicing fee income helps lenders offset revenue losses due to lower origination volume. Mortgage lenders that sell off loans to the GSEs or other investors to free up liquidity should consider retaining servicing. By investing in the right mortgage servicing software such as FICS’ Mortgage Servicer, lenders can effectively service their loans in-house. The right software can help servicers comply with investor requirements and create value for their organization and its customers.

Benefits of Servicing Retention

Selling mortgage loans on the secondary market provides liquidity, freeing up funds for additional lending so lenders can originate more loans (focusing on purchases instead of refinances). Lenders that sell to the GSEs may choose to retain the servicing rights. Keeping servicing in-house benefits both lenders and their borrowers by generating servicing fee income, increasing cross-selling opportunities, and improving the customer experience.

Servicing fee income. Well-trained staff using robust mortgage servicing software can service 700 or more loans per employee. Doing some simple math, using the average loan size in early August ($413,500) and the standard service fee of 25 basis points for the year, each servicing employee can generate more than $720,000 in annual service fee income alone. Ancillary income, such as late fees and commissions on optional insurance, increases the profits.

Cross-selling opportunities. In-house servicing can also lead to more sales opportunities via more personal customer relationships. Lenders can become a trusted advisor to the borrower to help protect the asset and offer home improvement loans as well as options for home maintenance to generate additional revenue and provide a positive customer experience.

Customer satisfaction. Transferring servicing to another institution jeopardizes customer satisfaction. According to J.D. Power’s 2022 U.S. Mortgage Servicer Satisfaction Study, overall customer satisfaction and trust in the servicer drop when the mortgage is transferred to a servicer that is different from the originator. The originating firm that made the transfer also suffers, with only 15 percent of transferred customers saying they are “very likely” to consider using the original lender in the future. By retaining servicing, lenders build borrower trust and loyalty.

Better communication. When servicing is done in-house, lenders can provide the exceptional customer service that borrowers — and the Consumer Financial Protection Bureau (CFPB) — expect. When servicing is outsourced, the lender has no control over the quality of the customer service provided by the third-party provider.

Although most borrowers have exited COVID-19-related forbearance, approximately 360,000 homeowners are still in forbearance plans, and there was a slight increase in Ginnie Mae forbearances in August 2022. As borrowers exit forbearance plans, communication between mortgage professionals and borrowers is more important than ever. The CFPB warned servicers to take all steps to prevent avoidable foreclosures as borrowers exit forbearance. The CFPB is paying close attention to how well servicers are:

• Being proactive. “Servicers should contact borrowers in forbearance before the end of the forbearance period so they have time to apply for help.”

• Working with borrowers. “Servicers should work to ensure borrowers have all necessary information and should help borrowers in obtaining documents and other information needed to evaluate the borrowers for assistance.”

• Handling inquiries promptly. “The CFPB will closely examine servicer conduct where hold times are longer than industry averages.”

Preventing avoidable foreclosures. “The CFPB will expect servicers to comply with foreclosure restrictions in Regulation X and other federal and state restrictions in order to ensure that all homeowners have an opportunity to save their homes before foreclosure is initiated.”

During times like this, when many borrowers need prompt, exceptional communication, personalized attention, and assistance from their servicer, in-house servicing has even greater value.

Servicing Software Enables High-Quality In-House Servicing

To make in-house servicing efficient and effective, servicers should use mortgage servicing software that integrates with other in-house software, such as the core system and loan origination system (LOS), to provide seamless data flow for every facet of mortgage servicing. Mortgage servicing software automates investor reporting, making it easy for servicers to comply with investor reporting requirements and accurately remit funds and report on the status of the loans in their portfolio.

Web applications give borrowers convenient, immediate access to their up-to-date mortgage information, allowing them to make online payments and access real-time loan information and documents. Web applications are an easy way for servicers to communicate with borrowers. Servicers can use web apps to send personalized email messages such as “Your forbearance period ends on November 15th. Contact us now to discuss repayment options.”

Supplement Technology with the Human Touch

While 90 percent of consumers use digital banking channels, human interaction (in person or by phone) is essential for providing financial advice and executing more complex transactions. Two-thirds of consumers prefer to rely on human expertise when getting any financial advice.

Digital mortgage technology such as mortgage servicing software and web applications can provide loan information “on-demand,” but borrowers still want the human touch. While they may prefer to check their balance or make payments online, many borrowers still want to interact with real, live mortgage professionals occasionally — such as when exiting forbearance.

Servicers that embrace a hybrid approach — blending self-service technology with support from well-trained mortgage professionals — will have more loyal, satisfied customers.

By retaining servicing and utilizing the best mortgage servicing software like Mortgage Servicer, servicers can increase revenue while delivering better customer service that promotes borrower retention. Web applications like eStatus Connect give borrowers 24/7 self-service access to loan information, leaving servicers more time to provide personalized support and financial advice when borrowers need them.

(Sponsored content includes material submitted independently of the Mortgage Bankers Association and MBA NewsLink and does not connote an MBA endorsement of a specific company, product or service. For more information about sponsored content opportunities, contact Bill Farmakis at bill@jlfarmakis.com or 203/834-8832.)