MBA NewsLink Q&A with Clarifire’s Jane Mason: Navigating Loss Mitigation Challenges

Jane Mason is CEO and founder of Clarifire and the original architect behind CLARIFIRE, an application that brings all parties within mortgage servicing operations together onto one secure platform. She has years of leadership experience building process automation technology solutions for the financial services and mortgage industries.

Mason has received numerous awards and accolades for her service to the mortgage industry and local business community, including a Mortgage Bankers Association 2020 Tech All-Stars Award.

MBA NewsLink: The Mortgage Bankers Association is predicting unemployment to increase more than 1 percent by the end of the year. What impact will this have on delinquencies in 2024 and, if an increase is anticipated, how should servicers prepare?

Jane Mason: It’s inevitable that a significant shift in the unemployment rate will impact the housing market in some way. While unemployment is still very low, historically speaking, a 1% increase is likely to be a key cause of an uptick in mortgage delinquencies, especially if interest rates remain elevated.

How well servicers are able to handle an anticipated increase in delinquency volumes boils down to their tech strategy. For example, how easily can their servicing software be integrated with third-party service providers, such as housing counselors that provide homeowners with the assistance they need while at the same time augment the servicer team? Is your technology equipped with robust mobile self-service options that enable borrowers to request assistance, and gain automated workout options and approvals? These capabilities will be super important going forward.

Having an early warning system in place is also crucial, which is where bulk workflow processing of like requests and artificial intelligence, specifically IDP (intelligent document processing) can come into play. AI and machine learning tools are great at analyzing large volumes of data to identify at-risk loans and patterns in borrower behavior. When coupled with proactive borrower solicitations and informative outreach using intelligent workflow automation, these tools can help servicers be more proactive when it comes to engaging, educating and assisting distressed borrowers.

By automating routine tasks and workout underwriting, the investment in digital servicing workflow is imperative to enhancing loss mitigation processes, enabling servicers to focus their teams on more difficult borrower scenarios. Overall, technology can help alleviate the complexities, but the human touch from the servicer can make a huge difference.

MBA NewsLink: Many experts are predicting natural disasters, including severe weather and wildfires, will continue to rise. What lessons have servicers learned from past disasters? What are some ways they can prepare now to address this growing concern?

Jane Mason: Natural disasters have been a pressing concern for mortgage servicers. Servicers have to be armed to expect the unexpected by implementing a digital arsenal of automation. Perhaps the biggest lesson natural disasters have taught servicers is the critical importance of rapid response and operational flexibility. Disasters don’t operate on a schedule, which means servicers need systems and processes in place that can quickly adapt to changing circumstances and provide automated relief as new options become available.

Offering borrowers a mobile-accessible link or centralized call center number with workflow automation driving fast options is also critical. Such tools can help servicers determine whether federal housing agencies are providing temporary forbearance or disaster payment deferrals, as they did during the Maui wildfires and Hurricane Idalia.

Another lesson has been the importance of clear, consistent and proactive digital communication with borrowers. This involves not only keeping borrowers informed about all the options and support available to them, but also making sure all channels of communication are open and accessible, including mobile apps and text messaging. Recent disasters have also taught servicers about the value of having robust data backup and recovery systems in place, so they are able to protect sensitive borrower data and ensure the continuity of their operations.

Basically, no one expects natural disasters to let up anytime soon. If you’re not using technology that’s secure, nimble and makes communication channels easier for borrowers instead of harder, now’s the time to get it.

MBA NewsLink: Given the economic landscape, what are the best strategies for proactively identifying at-risk borrowers and mitigating the risk of defaults and foreclosures?

Jane Mason: I already mentioned how AI can play a pivotal role in identifying at-risk borrowers by processing vast amounts of data and assessing historical patterns in borrower behavior. But to dig a little deeper, the key is integrating predictive analytics into your workflow and managing of exceptions, and following it up with effective real-time borrower communication and education.

Predictive analytics enables servicers to swiftly identify borrowers who may be struggling even before the borrower thinks of asking for help. Meanwhile, workflow automation can add solicitation processes, pre-foreclosure reviews, and robust loss mitigation processes to the day-to-day operations, making overall management of loan portfolios more efficient and borrower-centric. Automated workflows can also make sure borrowers receive personalized and relevant information about their payment options and relief programs. This both streamlines the communications process and helps ensure servicers comply with the myriad loss mitigation timelines and guidelines.

Another important strategy to have in place is being able to integrate your servicing platform with third-party assistance, such as HUD-approved housing counselors and other organizations created to help distressed borrowers.

MBA NewsLink: If rates continue to drop in 2024, what’s your outlook for refinance activity or loan modifications, as well as opportunities for servicers to cross sell equity loans, HELOCs and possibly other products for homeowners?

Jane Mason: Lower rates should improve refinancing activity significantly, but just how much of an impact they will have remains to be seen. I doubt rates will fall to the historic lows we saw a couple of years ago, at least not anytime soon. That being said, the mortgage industry has already seen a steady increase in home equity products as a means for homeowners to consolidate debt and access funds for other financial needs, so lower rates will only increase these opportunities. The key is consolidating the view of the borrower as a whole. Knowing your customer, what type of loans they have, and what your organization can help them with is a good way to enhance customer retention and results.

MBA NewsLink: What sort of regulatory changes or new loss mitigation guidelines are you anticipating next year, and what challenges and opportunities could they present in servicing and loss mitigation?

Jane Mason: Changes to loss mitigation guidelines and requirements have been accelerating ever since the COVID-19 pandemic. I don’t see this trend slowing, especially with loan delinquencies starting to tick higher and housing market experts expecting more loan defaults this year than last. As COVID-era protections have expired, for example, HUD has been constantly amending and sending out new guidance for loss mitigation processes involving FHA loans. Every one of these changes involves an adjustment of some kind such as documentation and timelines for borrower outreach and process management. I do think that, for their part, Freddie and Fannie will continue to enhance their technology initiatives, making it easier for servicers to adapt new requirements.

Obviously, the challenge for servicers is staying updated and compliant with all these changes. That’s pretty difficult without a robust servicing platform that is capable of leveraging or creating new loss mitigation workflows quickly as guidelines and requirements change on a regular basis. But there’s an opportunity here as well. Servicers that make the switch to more flexible technology that facilitates seamless integrations with their third-party partners will be better able to stay compliant while providing homeowners with the timely assistance and resources they need. You also need to factor ROI into the equation. Ultimately, new technologies can reduce costs, enhance a servicer’s reputation and increase borrower trust. But to leverage this opportunity, you have to take action—and there’s no better time than now.

(Views expressed in this article do not necessarily reflect policies 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 Editor Michael Tucker or Editorial Manager Anneliese Mahoney.)