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» VISIT US ONLINE @ DSNEWS.COM COVER STORY March 25, 2014 FIVE STAR GOVERNMENT FORUM Newseum in INDUSTRY INSIGHT MARKET PULSE Another area is vendor management, especially related to law firms that outsource foreclosures or other steps in the default management process. The responsibility to manage and oversee vendors has taken on new importance with much greater risk and penalties than in the past. The servicer must demonstrate responsible oversight of vendors. One effective way to do so is to establish a detailed assessment of vendor management including sourcing, due diligence, and compliance operations and policies. Yet many servicers don't have a formal vendor management program in place or anyone in charge of a vendor oversight function. Servicers can realize other benefits from evaluating performance standards across many operational processes associated with vendors such as underwriting practices, issue resolution, policies and procedures, contracts, operational setup, and data analytics and reporting. Washington, D.C. TECH Garnering the Resources POINT— COUNTERPOINT How can servicers gather the forces to conduct these methodical reviews at a time of resource constraint for most players? Each servicer devises a strategy unique to its own needs and capabilities. With operational functions related to compliance, vendor oversight, and risk management under intense, complex, and, in many cases, unprecedented scrutiny, nearly all servicers need outside advice along the way. Law firms can provide good guidance in defining risk areas and regulations. Consultants can design programs to test controls, processes, and loans. Depending on the size of the servicer, much of this work can be done in-house, but expert guidance in defining regulations and the appropriate approach is invaluable. Even though they face an increasingly complex regulatory climate, servicers can chart a calm, objective approach that enables them to define their quality standards, identify and prioritize their gaps, and take proactive action in solving issues. Servicers who respond to regulatory risk can do more than survive the storm. They can navigate around it. Sue Allon serves as vice chairman of Stewart Lender Services and leads its due diligence and capital markets initiatives. She was previously CEO and founder of the mortgage due diligence and risk management firm Allonhill. 91

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