Executives Discuss Their Challenges, Goals: #MBAServicing24

(Left to right: Robert Broeksmit, CMB, Steven Bailey, Michael Dunlop, Michael Henry, Jay Jones, David Sheeler)

ORLANDO–Top executives from PennyMac Financial Services, Merchants Bank of Indiana, M&T Bank Corp., Mr. Cooper and Freedom Mortgage Corp. discussed the biggest challenges the mortgage servicing industry faces here at MBA’s Servicing Solutions Conference & Expo 2024.

“You listen to complaints, you listen to phone calls; customers genuinely will tell you where your pain points are, your employees are going to tell you what your pain points are,” said Steven Bailey, Senior Managing Director and Chief Servicing Officer, PennyMac Financial Services, Westlake Village, Calif.

“You have to know where your big costs are and you have to use all the analytical tools you can to get there. That just tells you what your problems are,” Bailey said. “The magic happens when you can figure out how to translate, ‘I think I know what my problems are’ into ‘I think I know what my solution is.’ Now, how do you get that into actual requirements so that a coder who doesn’t know your business can actually make it do something useful? For us, it’s self-service for customers, moving into elimination of tasks, then, how can I improve the productivity of my people? And then how can I analyze whether or not those investments actually paid off? And then it’s all about culture management and celebrating the successes of individuals and the teams; measure everybody’s goals, then comeback evaluate and celebrate. If you do that long enough, you start to set a culture and a mindset for your employees. And they start driving, which is when you get there.

Michael Dunlap, President and Chief Executive Officer, Merchants Bank of Indiana, Carmel, Ind., said he has a slightly different perspective. “As a bank, certainly, I think the elephant in the room is Basel III and what effect would that have on a bank? We are a warehouse lender, and certainly, these are tough times,” he said.

The Mortgage Bankers Association has pushed back strenuously on the mortgage elements of the Basel III proposed capital requirements. This advocacy has included communicating its strong opposition to key elements of the proposal through letters, a public relations blitz, blog posts and on Capitol Hill, including the testimony MBA President and CEO Bob Broeksmit, CMB, gave before the House Financial Services Committee in September.  

MBA is making recommendations to reduce the risk ratings on MSRs and warehouse lines to ensure liquidity in the market, Broeksmit said. And the association is going further and arguing that what has been in place is not conducive to good liquidity, risk management or overall health market competition.

“You have higher rates, you don’t have as much origination volume, how are customers performing? It’s been a very tough quarter for those customers, and how do we get through that cycle?,” Dunlap said. He noted Merchants is looking at AI. “Whatever we can do to make us more efficient, serve our customer better and cut costs,” he said. “We have some technology initiatives on the plate to do that. And then also, strategically, where can we go forward and just be better? This should be an interesting year.”

Michael Henry, Head of Mortgage Servicing with M&T Bank Corp., Buffalo, N.Y., also cited Basel III. “As an organization that is subject to whatever Basel III ultimately turns out to be, we were discussing it today and talked about what are the two endpoints? One possible endpoint is Basel III passes as written. The other endpoint is that nothing changes. We’re thinking about those possibilities and how do we need to calibrate our strategy around the servicing business depending on where in the spectrum things ultimately shake out.”

Henry said he is waiting to see how the Basel III proposal resolves, “but there are things that we’re working on that are kind of evergreen things that you always want to get better at no matter what’s going on. And it really does come down to, you know, for the Scrabble players in the house, the double-word scores, where you find things that are both making your system more efficient and making your customers happier. Some examples include spikes in the call center at the beginning of the month, midway through the month or when the grace period ends. How do we shave those down and teach people how to self-serve instead of talking to a live person? How do we do a better job of proactively communicating with customers, telling them the things they want to know, which might be as simple as telling them we received their payment. How do we contain those costs? How do we re-look at some of our customer communications, that–while they may be completely compliant–aren’t always the easiest thing in the world for customers to understand. How can we refresh those in a way that’s going to improve the experience?”

Henry said people want self-service. “We know that a lot of people who wind up calling the call center were hoping to have gotten that work done by themselves,” he said. “So, what can we do in terms of our digital assets and the intuitiveness of our websites to point people in the right direction to do what they came there to do without them having to get on the phone? That’s a big area of focus.”

Mr. Cooper Executive Vice President of Mortgage Servicing Jay Jones said mortgage servicing customers continue to evolve. “Their demands on self-service tools, demands on information, you really don’t want to pause. I think we’re all focused on going through our processes to determine what we need to do to streamline our company, to educate the customer better and allow them to self-service. I think that’s really our biggest theme. That’s going to drive lower costs and improve your compliance, all the things you care about. So that’s really where I’m focused.”

“Without trying to be repetitive, I think we’re at a juncture right now in servicing,” said David Sheeler, Senior Executive Vice President, Freedom Mortgage Corp., Boca Raton, Fla. “We’ve spent the last few years really reacting to what’s happened in the markets. All the new programs are fantastic and have really helped countless number of consumers and customers. But from our perspective, I think we have an opportunity right now to reevaluate, but also to reimagine the way we think about servicing.”

Sheeler noted everyone wants to be able to self-service. “But, one of the big things we’re doing right now is breaking down every single process that we have in servicing,” he said. “We have the time to do that now, and to really re-think the way that we’re serving customers. We’re looking at our organization vertically, but also looking at it horizontally.”

“Servicing is complex,” Sheeler said. “You have all the federal regulations and all the state regulations, and sometimes they conflict. The way we look at that is, let’s do things in small increments, not trying to boil the ocean in many of our processes, but doing them through pilots, redesigning with our technology. And then go ahead and after we’ve redesigned it and really like your process, then launch your technology. And you effectively built the requirements. So, it really comes down to simplifying all the complexities inside servicing and re-imagining them.”