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MortgagePoint » Your Trusted Source for Mortgage Banking and Servicing News 28 July 2023 F E A T U R E pen at the current pace of change without a significant shift in economic conditions. The Fed remains data-dependent. More months of above-expectation economic indicators increases the likelihood that more rate hikes are ahead." As we reach the midway point of the year, MortgagePoint magazine gathered several in- dustry experts to discuss the state of the mort- gage servicing marketplace through mergers and acquisitions; new tech enhancements to bolster workflows; and preparing for future trends, among other topics discussed. Many thanks to Michael Keaton, SVP, Default Subservicing for PHH Mortgage Corporation; Jason Kwasny, Chief Servicing Officer for Servbank; Jocelyn Martin-Leano, Chair of the National Mortgage Servicing Association (NMSA); Michael Merritt, SVP, Customer Care and Mortgage Default Servicing for BOK Financial; Candace Russell, VP-Post Sale for Carrington Mortgage Services, LLC for sharing their insight and expertise with our readers. Q: How would you assess the current state of the mortgage servicer marketplace? Michael Keaton: The state of the mortgage servicing marketplace is strong. Originators and investors in mortgage servicing rights (MSRs) have many different servicing options. That said, we have seen more consolidation in the last 12 to 18 months than we did in the period before COVID-19. Servicing is not easy, as margins are thin, and accuracy and precision are critical. Owners of MSRs need a strong and competent servicer who pays exceptional attention to detail, delivers on their commitments, and treats their homeowners as key customers. Jason Kwasny: The current state of the mortgage servicing marketplace is in flux. After the massive growth seen under the low interest rate-fueled originations boom, we are seeing a slowdown of new loans overall coming in upstream, along with an increase in interest rates. We are also seeing an elevated number of loans being service-transferred as an increas- ing number of originators are selling their MSRs to free up liquidity. This has placed a great deal of stress on the broader industry, more specifically on a mortgage servicer's ability to properly and efficiently transfer loans with minimal customer disruption. Like any industry, when companies are placed under stress, their weaknesses are ex- posed. As a result, you get to see who has the proper processes and procedures and skilled personnel in place to handle the high volume of transfers. At Servbank, we have the loan-transfer process down to a science with a fully as- sisted, stress-tested transfer process that is entirely transparent. We are obsessed with and truly care about the customer and client experience, so whether those loans are com- ing to us or leaving, through our processes and actions, we make transferring loans a seamless and worry-free process for our clients and customers. Jocelyn Martin-Leano: The cost of servicing defaulted loans has gone up and loss mitigation has been challeng- ing in an elevated rate environment. Fortunately, the combination of strong borrower equity positions and government programs to keep borrowers in their homes have kept delinquencies and foreclosures at pre-pandemic levels. That said, technology improvements that brought about productivity—such as AI usage in call centers—have helped offset costs. The adoption of disruptive technology like AI and machine learning (ML) continues to be constrained to smaller-use cases than larger-scale applications due to the complex- ity of getting servicer data "AI-ready." Large platform providers are not digital native, and that causes solutions that are hybrid legacy with bolt-on AI solutions. Michael Merritt: Most servicers are working through the final group of COVID- 19-impacted borrowers to ensure they receive the right workout after their forbearance plans end to get the customer back on track. There are still loans where servicers have been unable to reach the customer and default activity is continuing, leading to elevated volumes. The industry is also moving into the "lessons learned" process from COVID-19 to prepare for any future increase in defaults. One of the common hurdles I hear about is how to deliver loss mitigation workouts in a high-interest-rate environment since tradi- tional mods would increase the customer's rate significantly. The industry is partnering with the GSEs and agencies to plan for more effective loss mitigation options to help with this issue. Candace Russell: Servicing has always been, in my opinion, a specialty market, especially default servicing. With the current rate environment, servicing is not only necessary but also an unexpected place of stability for some players. Data from the Mortgage Bankers Association (MBA) shows us that servicing is stabilizing shops right now. The marketplace is full of opportunity in that being good at servicing, regulatory change management, and loss mitigation is a very specific formula, and when done well, can make you valuable in the current ecosystem. Carrington Mortgage Services realizes the importance of being a trusted servicer and has opened opportunities such as being selected to assume the Master Servicer position for the Reverse Mortgage Funding portfolio. Unusual times present unusual opportunities. Q: What pain points, if any, have you experienced to date? Kwasny: As a company that is obsessed with experience and driven by a mission to create excellence, our pain points exist where we do not have full control over the entire process. This usually exists where we use vendors or must rely on other servicer's execution. These are the points that allow for opportunities for there to be something other than an optimal outcome. For example, in terms of escrow … it is one of the most common complaint areas in servicing. Aside from it being a subject that is complex to customers, most servicers, including us, have to rely on vendors. As we know with vendors, execution can be subpar at times, even when we attempt to hold our vendors to the highest of standards. Another example is service transfers. Some servicers are better at it than others, and it is the ones who aren't very good at it