TheMReport — News and strategies for the evolving mortgage marketplace.
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Th e M Rep o RT | 5 Take 5 Charting the Ups and Downs of Servicing with BSI Financial's John Lawrence among non-bank entities as they develop and refine business models to achieve sustained earn- ings and revenue. These innova- tors provide more satisfying and rewarding employment opportu- nities for professionals seeking a career path in mortgage finance, which should raise the collective skill level in our industry. M // With foreclosure rates continuing to fall, what does the servicer's role look like today, compared to the height of the housing crisis? LaWrence // New core competencies are emerging in our industry. Servicers must be more than experts in processing technology; they must also be proficient in information technology. That is, the market has grown to expect that processing efficiency is a given, and that transparency into servicing operations and the ability to generate key financial measures like cash flow, loan-level profitability, and portfolio performance are becoming more important functions of a modern servicing enterprise. Investors are looking to servicers for real-time visibility into loan-level and portfolio-level performance. Packaging and delivering this kind of data reliably and efficiently is becoming a major differentiator. M // The cFPB answered the sentiment of many in the industry by moving the effective date of the TILa reSPa Integrated Disclosure (TrID) rule from august 1 to October 3. Do you feel most servicers would have been ready had the august date remained? LaWrence // I believe that tech- nology is the enabler in achieving compliance, and that the technology was in place to support an August launch. What was not clear was whether workflow processes could be modified in time to make the adjustment seamless. Could the industry have supported the August deadline? I think, yes. But the tran- sition period would've been rocky, particularly for smaller servicers. M // Speaking of TrID, what steps should companies take as they make their final preparations for before October? LaWrence // Make sure you have thoroughly tested your tech- nology platforms to ensure that the proper documentation can be supported within the required time frames. Take a hard look at desktop procedures and workflow processes, particularly those prac- tices that touch time-sensitive ac- tivities. Are you adequately staffed to handle changes in procedures and documentation? Also, ensure that you can produce reports and provide operational visibility into loan operations to satisfy investors and regulators. And have a sound plan to communicate with your employees, your clients, and bor- rowers about the changes that are taking place. M // Other than TrID, what are the key issues affecting mortgage servicers today? How does BSI Financial address such issues? LaWrence // A major issue is the high cost of compliance in general. This includes the cost of staff and outside counsel that specifically monitors compliance requirements because these requirements contin- uously evolve. At BSI Financial, we rely on our legal teams to forecast how laws are changing and our IT organization to create a flexible infrastructure that uses technology as a compliance safety net. We ask our employees to abide by a set of core values that acknowledge compliance as a core theme. Another area that we focus on is data security and integrity. We have in place measures to protect our clients' and their borrowers' data assets, and we apply quality control measures that help ensure the integrity of loan—and portfo- lio—level data. We have an ongoing program called BSI Process360, where we examine every aspect of our opera- tions to identify and eliminate fric- tion points, document procedures, and establish best practices. We use this program to realign and reinvent ourselves so we are capable of succeeding under a wide range of economic and regulatory scenarios. M // Do you feel the number of non-bank lenders and servicers has grown in the last few years? If so, how does this growth change the marketplace? LaWrence // The data clearly indicates that non-bank lending and servicing is growing, and new capi- tal requirements imposed on large bank lenders is a major driver. I think the growth in non-bank lending and servicing has affected the industry in three ways: first, scale is no longer as important as it used to be. This lowers barriers to entry and fosters competition, which is the mark of a healthy industry. This assumes, of course, that non-bank entities meet capital and liquidity require- ments that foster stability in the market. Second, the growth in non-bank lend- ers and servicers has raised the bar on value and performance, as smaller companies have exploited the ability to provide a faster, more personalized customer experience. Once again, technology is a major facilitator here. Third, we're seeing an interesting mix of specialization and di- versification The servicing industry is changing. To give you an idea of just how much, we sat down with BSI Financial Services' John Lawrence. Among the many services it offers, BSI Financial provides mortgage servicing and special servicing, and Lawrence was recently brought on to round out the company's seasoned executive team. A 20-year veteran of the mortgage industry, Lawrence assumed the role of eVp and Chief Servicing officer at BSI Financial and joins the company after being a portfolio manager at pIMCo.