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» VISIT US ONLINE @ DSNEWS.COM eStretch COVER STORY THE BIG PICTURE By John Alkire Focusing on Fundamentals One of the latest trends seen in the market involves servicers returning to their core businesses with traditional lenders focusing on the efficient processing of performing loans and special servicers concentrating on curing defaults and assisting distressed borrowers. As regulation has becomes more complex and occurrences of short sales and loan modifications multiply, traditional servicers increasingly contracted out the management of their distressed portfolios. This idea of servicers going back to their roots and focusing on their core competencies has elevated industry performance and directly benefitted borrowers, POINT— COUNTERPOINT they serve—and the regulators and legislators who often demand those changes. As servicing becomes more complex, the market segments into different types of servicing operations based on companies' specific strengths. Together, the various players—from traditional servicers to subservicers, special servicers, and component servicers—make a pretty good team with the more traditional organizations calling upon the others to pinch hit as needed in their defined areas of expertise. THE BIG PICTURE Things change all the time, and in the servicing business—just like in baseball—even the smallest tweaks can significantly affect the outcome of the game. Being able to predict what might happen before it actually does allows you to prepare your next move and react with agility, but it means paying close attention. Simply put, if you want to stay in the game, you have to keep your head in the game. In mortgage servicing, things are always in some form of flux, requiring servicers and their partners to modify processes and challenging them to rethink how they can assist consumers and affect the market in meaningful ways. Based on how this market evolved and understanding that constant change keeps this industry moving forward, it's important to pay close attention to what's happening with lending and consumer trends, the economy, new regulations—basically anything that might have an impact on the way business is conducted. This is more than a game of chance, so be ready for whatever comes next. Those in servicing have witnessed dramatic changes in recent years. Each time the market has shifted, they've adapted to meet the latest requirements of the lenders and consumers helping to ensure that loans—regardless of their status—are handled by those with the requisite expertise to provide whatever guidance and procedural execution is necessary. Whether this bifurcation of the industry will continue as the housing market recovers is something to ponder, especially among special and component servicers. If at some point the number of defaults declines to a low enough level, we may begin to see traditional servicers absorb delinquent loans back into their portfolios. Meanwhile, there are a number of other developments taking place that are already significantly reshaping the mortgage servicing landscape, from the increasing cost of doing business to the way new regulations continue to impact anyone and everyone in mortgage servicing. INDUSTRY INSIGHT I played a fair amount of baseball growing up, and I've found that I can apply quite a bit of what I learned on the ball field to other aspects of life, including business. For starters, any ballplayer worth his salt knows that performing well out on the field takes preparation and focus. You have to be ready for anything. MARKET PULSE With the housing crisis winding down, servicers are warming up for what could be a whole new ballgame in mortgage servicing. Big-Ticket Servicing The old adage "it takes money to make money" never felt more true than right now. It seems like the cost of doing business as a servicer just keeps going up. That's especially true when working toward possible loan modifications for delinquent borrowers. The number of mandated tasks has skyrocketed and borrower notification and cure periods have been lengthened, resulting in notably extended processing timelines. And that trend doesn't appear to be fading away anytime soon. In fact, processing timelines could very well be extended further. Short sales, which are generally preferred over foreclosures, also require time and resources 63

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