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» VISIT US ONLINE @ DSNEWS.COM 59 will take advancements in tech to stay strong as these new generations enter the housing market. "It requires some resources, some capital, but servicers will have to keep pace with the digital transformation happening in the industry. As consumer preferences move towards eClosings, originators and investors are also moving in that direction, and therefore servicers will have to follow along," Falcon said. "Servicers haven't had to make significant changes yet because there was no demand for it, but that demand is growing. As investor acceptance of digital mortgages grows alongside consumer demand, servicers must be fast followers if they want to maintain their servicing portfolios. ey will have to keep pace to survive." Part of the appeal of new technology is increased ease and accessibility, not just for the customer but for the servicer as well. Business process automation, according to Jane Mason, CEO of Clarifire, can cut costs by eliminating manual efforts. Artificial intelligence, she said, coupled with complex processing and workflow, gives servicers the ability to get customers the info they need, when they need it. Automation can also help identify risks in what Gagan Sharma, President and CEO of BSI Financial, calls a "needle in a haystack," as it is normally a small percentage of loans that are at risk. "Most servicers are running at a level of quality where 98%, 99% of the loans are working just fine," Sharma told DS News. "It is the last 1% of that causes issues. We have spent a lot of time, effort, and money on identifying those high-risk assets and then putting corrective measures in place." THE ECONOMIC QUESTION MARK e Federal Reserve slashed interest rates three times in 2019, dropping its benchmark lending rate in October by another quarter of a point. Doug Duncan said the Fed cited "implications of global developments" as rationale for the cut. Although the Fed has lowered rates to spur economic growth, Jarred Kessler, CEO of EasyKnock, said that plans don't always work out. "Lowering rates doesn't always have the economic impact we think, or expect it to have because it disrupts the natural economic ecosystem," Kessler said. "Just look at Japan—it can drive housing growth and a push in the stock market, but other facets of the economy are bound to lose. In the longer term, this along with inflation can have a very negative impact." Kurt Johnson, Chief Credit Officer for Mr. Cooper, cited interest rate increases as a major lesson learned in 2019. e Fed was expected to continue raising interest rates at the end of 2018, but, as Johnson said, "Interest rates rarely follow their predicted path." "As a mortgage originator and servicer, creating processes that scale up and down without the need to ramp up or down; and developing tools to help loan officers and customer service agents address customers' needs is critical," he continued. ough the possibility of a future recession remained a hot topic in 2019, Johnson doesn't expect this to come to fruition in 2020, as several economic indicators point to growth. However, as his colleague Rawls noted, delinquencies are expected to increase in the coming year. "e average consumer is healthy and home equity has contributed greatly to that," Johnson said. "Leading up to the great recession, the value of the U.S. housing market increased from 2001 to 2006 by almost 60%, from just over $15 trillion to just over $25 trillion. However, at the same time, mortgage debt almost doubled, from just over $5 trillion to just over $10 trillion. After bottoming out in 2011, the value of the housing market has again risen dramatically, from around $19 trillion to almost $31 trillion. However, mortgage debt has been relatively stable, rising from just over $10 trillion to $11 trillion today, creating household equity that is 30% higher than its past peak in 2006." A consumer-led recession is unlikely, Johnson noted, as incomes have risen steadily through 2019, while unemployment has stayed historically low. is was offset, he noted, by slow home price appreciation. "is should increase delinquency rates, particularly with low-down-payment, first-time homebuyers in FHA products—an historically more labor-intensive product to service," Johnson said. "Having experience dealing with distressed customers and having robust loss mitigation technology, allowing a servicer to scale up quickly for rising delinquencies, will be a differentiator in the coming 12 to 24 months." ough his outlook does not include a recession in the near future, Johnson notes that now is the time to prepare. For Johnson, this means utilizing technology during times of health and stability—so you are better prepared when significant change comes down the pike. "e industry was caught flat-footed in 2008 when increases in delinquencies outpaced staffing adds," Johnson said. "Effectively leveraging technology can help solve some of those issues by quickly scaling and improving the customer experience." "Most servicers are running at a level of quality where 98%, 99% of the loans are working just fine. It is the last 1% of that causes issues." —Gagan Sharma President and CEO, BSI Financial Services

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