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» Shelley Leonard Senior Vice President Evolving Toward Standardization Technology continues to play a major role in the default servicing industry's evolution in today's regulated world. To make this transition, servicers have started to focus on five key areas that will help them move their organizations and the industry toward this goal. 1. Simplification of the Technology Footprint The effort to simplify the technology footprint within a servicing organization has become a vital area of focus for IT organizations. Complex technology environments are difficult to change on a dime, which might be required in order to meet regulatory requirements or market demands. Complexity also makes efficiency gains harder to realize, and can increase the ramp up time for new users. Simplification can help address these issues. 2. Configurability of Technology The ability to configure technology so operating standards and practices are as foolproof as possible is vital to compliance success. With additional changes still likely to impact upon the default servicing business into the foreseeable future, servicers must be able to analyze regulatory and market requirements, and rapidly translate them into business rules. By configuring systems to operate based on these business rules, servicers can help govern the way users conduct their activities based on the nature of the work. 5. Establishment of Standards In the default servicing industry, servicers are very interested in standardizing processes, rules sets, and other activities that are common across the industry. This does not imply that there won't still be the flexibility needed to make changes as they are required, but rather, that those changes will be made the same way across the industry. Some such standards such as MISMO currently exist, but there is much more work to do to create uniformity across servicing organizations. Since there is no standards organization currently in place for the servicing industry, it will take strong leadership and collaboration from within the industry to develop these standards. The default servicing industry is in a time of great change and great opportunity. As it moves toward greater internal and industrywide standardization, technology will remain an important key to success. Shelley Leonard is SVP of business strategy, servicing solutions, and technology for Lender Processing Services. She can be reached at exec. author@lpsvcs.com. Joe Bada Chief Executive Officer FIVE BROTHERS Targeting Technology To successfully navigate the regulatory challenges ahead, the industry must harness the power of technology. New Consumer Financial Protection Bureau (CFPB) rules taking effect in January 2014 are ratcheting up pressure on mortgage servicers and their compliance management systems. In what continues to be a regulatory environment evolving at warp speed, technology is key to successfully addressing these new rules as well as navigating an increasingly complex web of federal, state, and local default property regulations. Legacy mortgage servicing systems alone may not be enough. What is needed is an integrated suite of complementary solutions, each optimized for a specific default servicing requirement or task and fully compatible with the latest compliance requirements. Agile, tech-savvy default service providers, who live on the front lines of industry change, fill the important aspects of this need. By creating innovative digital solutions fully compatible with their clients' legacy mortgage servicing platforms, these third-party partners are empowering servicers to save time, eliminate errors, and increase efficiencies across the enterprise, while meeting compliance challenges head on. INSIDE THE BELTWAY As the default servicing industry continues to adjust to the new regulatory environment, technology will continue to play a major role in helping servicers adhere to rules and regulations as well as remain in compliance with their internal standards. In fact, the entire industry is moving toward more overall standardization, with much less in the way of the competitive "secret sauce" so prevalent in the past. Today, servicers want to ensure they are all working within acceptable norms. 4. Traceability Related to control, default servicers not only need to know that users are following all processes and procedures, but they also must be able to prove it for both internal audits as well as for regulatory agencies. Traceability is another essential capability that technology can deliver, allowing servicers to prove that users did what they were supposed to do given the rules in effect at a particular point in time. TECHNOLOGY DEVELOPMENT INDUSTRY INSIGHT LENDER PROCESSING SERVICES 3. Stronger Controls for Uniformity Default servicers often talk about the need to control how users do their work so that everyone involved in a particular process or task does the same thing the same way every single time. Technology can support uniformity by enabling servicers to establish rules sets to govern the processes and procedures part of each user's daily work. COVER STORY TECHNOLOGY DEVELOPMENT VISIT US ONLINE @ DSNEWS.COM Managing Default Processes Software that helps servicers eliminate potentially costly conveyance problems, while increasing the value of their FHA/HUD mortgage assets, provides one example of the new "targeted technology" approach. Functionality starts with claims automation, which allows servicers to generate completed HUD claims sections A through E faster and more efficiently to produce fullycompliant FHA claims. This technology can help servicers lower claims processing costs and improve productivity, while producing dependable, error-free results. Bid accuracy is a second element addressed by the new task-specific technology. —Rep. Randy Neugebauer (R-Texas) Special software streamlines bid validation "It will take over 24 million man hours to comply with Dodd-Frank rules per year. It took only 20 million to build the Panama Canal." 51

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