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Mortgage servicers need a new approach to Borrower Communications for 2023

BY Matthew Jinks

It’s no secret that the mortgage industry is going through a rough patch. In the fall of 2022, a combination of rising interest rates and a slowing global economy have caused a sharp decrease in loan originations and refinancing to sink to a 22 year low.

The MBA forecasts that they will plummet an additional 24% in the first half of 2023. So far, the mortgage servicing sector has proved to be resilient against the current market conditions. As the Q3 2022 performance report published by the Mortgage Banker’s Association notes: “With prepayments and delinquencies low, mortgage servicing has been the difference for many companies between profitable or not”. However, with delinquency rates forecasted to rise and the tap of newly originated loans to service running dry, it is likely that mortgage servicing will soon feel the pain currently being felt on the origination side.

The time is now for servicers to re-examine the systems, processes, and people in place to find ways to protect profits with less volume and higher delinquencies. An article in the MReport compels the mortgage industry to take this opportunity to “get leaner and work smarter” by embracing technology that increases efficiency rather than letting go of highly skilled staff members whose expertise will be difficult to replace when the market picks back up. The article states that this approach will not only drive down costs in the short-term, but will also equip servicers with the operational agility they need to deal with future market shifts.

Servicers looking to increase efficiency and reduce operational costs should start by taking a closer look at their processes to manage borrower communications. Most will find that outdated technology or an over-reliance on third-party print service providers has saddled them with a process that costs too much, is painfully slow, and results in poor borrower experiences. Here are some of the common issues which servicers could rectify by rethinking their approach and implementing modern technology solutions:

Issue #1 – Content changes are too slow and expensive

For many servicers, inefficiency stems from a content management process that is overly reliant on high-cost technical resources. Business teams typically author and edit communications in tools like Microsoft® Word® and define targeting rules in spreadsheets, but skilled developers are needed to implement changes, and generate proofs and tests into customer communications systems. If additional changes are needed, the same process must be repeated using these expensive technical resources until final approval is secured.  Servicers who rely on third-party print service providers not only have to deal with a markup on the costs of these resources but also face the additional hurdle of scheduling the changes with their printer and often leading to multi-week turnaround times for content changes. Regardless of whether developers are in-house or not, this approach is costly, slow, and poses a tremendous risk to servicers who often need content changes implemented by specific regulatory deadlines.

Issue #2 – Servicers are sticking with print, but digital is the way forward

Print and postage aren’t cheap, often costing servicers hundreds of thousands per year. Still, many servicers still send every statement, letter, and disclosure by mail with no option for customers to receive them digitally. This is partly because old-school technologies for managing these communications necessitate that every channel has its own management system and separate library of communication templates and content. This makes it extremely difficult for servicers to make the transition to digital since adding new channels also means adding cost, complexity, and risk to an already difficult-to-manage ecosystem. In the long term, digital is the future. Whether it becomes a government-mandated requirement, or a requirement to stay competitive with emerging digital-first players, servicers will need to make the transition. Servicers who keep putting it off may find themselves with no choice but to implement quick-fix solutions which will compound the existing inefficient content management problem. At the same time, those with a more proactive approach will be far better prepared to react to market demands.

Issue #3 – Servicers are tied to their Print Service Providers (PSPs)

Since servicers are often tied to a PSP’s software environment, it can be incredibly difficult to transition from one PSP to another to take advantage of lower production costs or in the event of a service outage or disaster. Templates would have to be re-coded into the new printer’s composition tool, then the new templates would need to be tested and proofed by the servicer’s stakeholder teams before service could resume. The CFPB has strict guidelines around the timing of borrower communications and any interruption to that flow could result in regulatory violations or borrower complaints. With profit margins set to get even thinner, the last thing a servicer needs is a hefty fine and the reputational loss associated with it.

Taking back control to drive efficiency and savings

With third-party relationships already well established, and technology stacks deeply entrenched, these problems can seem intractable. Change starts with a shift in mindset and understanding that technology has advanced and much of the work that print service providers do can now be accomplished by less expensive non-technical in-house resources using modern software.

What’s clear is that business users need to be empowered and given control if servicers are to rid themselves of their current inefficient and rigid predicament. This is impossible if every change cycle relies so heavily on technical work being done by a PSP. The PSP relationship doesn’t have to end, but mortgage servicers need greater flexibility and control over the entire content management lifecycle, including authoring content authoring, targeting, creating layouts and then composition, should be in the hands of the servicer. This means delivering files to PSPs after the composition process has taken place. This gives servicers flexibility to redirect print streams to take advantage of cost breaks or in the event of a disaster. It also enables servicers to make content changes on their own schedule, thus reducing the risk of a missed regulatory deadline. Lastly, it gives servicers the freedom to implement technology solutions that suit their needs better and support a more agile and cost-friendly approach to content management.

Implement a centralized content hub to drive efficiency

Change starts changing the way content is managed for your communications across channels.  Typically content is spread across multiple systems and managed by disparate teams. By leveraging a content hub that can power communications across all channels, teams can collaborate using a single solution that eliminates the operational siloes that lead to redundant content operations and wasted time and money. Content hubs also support content federation, which means individual teams can maintain their own communications and use their own process, but important brand standards can be enforced, and common content can be standardized and shared across touchpoints. But not all content hubs are created equal. Here are some things servicers should look for in content hubs that will solve the problems outlined above and cater to their unique needs:

  • A no-code editing experience for business users: Mortgage Servicers should look for solutions that empower non-technical users to control the content in their communications, apply targeting rules, and alter layouts without developer support. This puts an end to the painful back and forth between technical and non-technical teams enabling the business to speed up change cycles, decrease operational inefficiency, and reduce reliance on expensive IT teams or print service providers.
  • Integrated approval workflows: Some content hubs even have integrated collaboration tools that are designed to optimize and speed up the approval process. Capabilities may include the ability to take proofs generated by the hub and provide a side-by-side comparison of documents so stakeholders can easily see what has changed. Content owners can maintain visibility of the process and assign tasks with dates to ensure important deadlines for content changes are always met. 
  • Support for content reuse across communications and channels: Common content, such as regulatory disclosures, appears again and again throughout a servicer’s library of communications. Some content management approaches require users to manage this content separately for every communication and channel. Look for solutions that support a shared content model, which abstracts content from the presentation layer, and has the flexibility to use and re-use content anywhere that it’s needed. Content is managed from a single point of change, meaning that content authors only need to update a single shared content object and that change will be instantly reflected anywhere that content is in use. This model is not only far more efficient  -saving you both time and money, but it also ensures consistency, which is crucial to keeping all communications compliant. It also sets servicers up well to move beyond traditional composed communications like print and email to dynamic digital experiences, such as mobile apps or web portals, if the content hub supports high speed, API-based delivery of content via

The time has come

With storm clouds on the horizon, servicers can ill afford to sit back and maintain the status quo.

Servicers who take control of their borrower communications process and implement a streamlined approach to content management will not only realize significant cost savings in the short term, but they’ll also deliver a better servicing experience to their borrowers and be set up for a digital future.

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