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TH E M R EP O RT | 71 SERVICING THE LATEST O R I G I NAT I O N S E R V I C I N G DATA G O V E R N M E N T S E C O N DA R Y M A R K E T Online Event Asks: "What's Wrong In Servicing?" In a recent three-day online discussion organized by the Urban Institute, industry experts deliberated on the question, "Are mortgage servicing costs, complexities, and risks impeding lending?" U rban Institute Housing Finance Policy Center Co-Director Alanna McCargo moderated the event, first asking if there are ways to reduce the costs of regulation in servicing without increasing risks to consumers and the housing market. Meg Burns, SVP of Mortgage Policy at Financial Services Round- table, said, "Absolutely." "Consumers do not derive any benefit whatsoever from the com- plex and inconsistent rules that were imposed over the course of the crisis," she said. "Ironically, the various regulators who issued new policies all had the same goals in mind: to improve servic- ing practices and enhance the customer experience." Burns said the regulations have lengthened the time that it takes to resolve delinquent loans, which increases costs and harms the people who are in need of help. David Battany, EVP of Capital Markets at Guild Mortgage, agreed. According to Battany, con- sumer protection regulations need to be powerful, clear, and simple. "When regulations are unneces- sarily complex, or intentionally vague, this needlessly creates un- certainty and bureaucracy, which leads to higher costs, all of which are passed on to the consumer, and reduces access to credit, particularly for higher-risk and harder-to-serve borrowers," Battany said. The average cost to originate a loan is about $8,900, accord- ing to Battany, which is almost double what it was a few years ago. When borrowers sit down to look at their 100-page loan file, he wonders how many of those papers they actually look at and if the expensive work behind the scenes really adds value to them. "Most regulations [had] very good intentions. Most people would agree that the ability to repay and many servicing regula- tions created post-crisis solved real issues and provide important con- sumer protections," Battany said. "The issue lies in the unintended consequences of the people who in good faith wrote the details of the implementation of these regulations without having a full understanding of the complex business processes they were at- tempting to regulate." Ted Tozer, former President of Ginnie Mae, said though the CFPB has one foreclosure time- line, an investor has a different one. In his opinion, the servicer should have only one timeline to comply with that doesn't change based on the location of the property, the servicer's regulator, or who owns the mortgage. "Servicers need a set of rules and expectations that are specific, standardized, and consistently enforced by regulators and inves- tors," Tozer said. "A servicer should not be put in a position where they have to decide whose rules they will violate." This idea is consistent with the views presented in a recent white paper by the National Mortgage Servicers Association (NMSA), which looks to standardize key definitions, guidance, and best practices surrounding the preserva- tion and maintenance of vacant and abandoned properties. "At the end of the day, we have to remember the housing finance ecosystem is basically a zero-sum game," Tozer said. "Whatever economic burdens are put on mortgage investors and servicers, those costs will be passed on to borrowers in higher credit costs or limited credit availability." Study: Progress Aside, Mortgage Sector Still Has Image Issues T he housing crisis im- pacted the reputation of the mortgage servic- ing industry in the eyes of the public. But as the years went by, the industry had slowly rehabilitated its image. Despite the hard-won gains, however, the J.D. Power 2017 U.S. Primary Mortgage Servicer Satisfaction Study, released in July this year, customers have significant declines in their overall satisfaction and brand perceptions of mortgage servicers. This downturn was driven primarily by a growing number of customers who perceive their mort- gage servicer to be focused more on profit than on their customers. J.D. Power noted this could have long- term effects on future business. "The past few years have not been easy for mortgage servicers as they've struggled with regula- tory and market pressures but still managed to deliver on customer satisfaction. Now, as that trend starts to shift and customer satisfaction levels off, it is critical that mortgage servicers continue to balance the demands of this tough marketplace with the needs of their customers," Craig Martin, Senior Director of Mortgage Practice at J.D. Power, said. To measure customer satisfac- tion with their mortgage-servicing experience, the study focused on six areas: new customer orienta- tion, billing and payment process, escrow account administration, interaction, mortgage fees, and communications. Satisfaction was calculated on a 1,000-point scale. Despite the decrease in satisfac- tion, some companies remained steadfast. Quicken Loans was on top for the fourth straight year, scoring 840. It was fol- lowed by Regions Mortgage and Huntington National Bank, which scored 819 and 795, respectively. The study found significant improvement year-over-year by Bank of America, Nationstar Mortgage, and Ditech Financial. Those firms showed increases of 26, 29, and 37 points, respectively. For servicers needing some extra advice when it comes to building the right customer-client relationship, the study identifies key steps, such as improving client onboarding and digital offerings, cutting down on time it takes to interact with servicers, and focusing on mobile usage, that will increase satisfaction and brand image.