Tools Of The Escrow Trade
Escrow service providers are using new tools, from
Internet-based ASP (application service provider) to
outsourcing of services to boost efficiency and profit
margins.
BY GARY HUTTO
One of the latest industry terms used by those providing services over the Internet or over wide area networks is ASP or application service provider. (Microsoft also uses the term to refer to application server pages but that's another story.) Another term that has come into use is "information service provider," and yet another is "outsourcing." Mortgage servicers are involved with all three of these terms, which reflect how state-of-the-art Internet tools and business operations methods are being employed to
offer faster and more efficient escrow transactions.
Industry executives point to how these tools and other similar technological advancements in the escrow services field has enabled companies to improve their delivery of escrow services and achieve higher profit margins.
Jim Thornton, executive vice president, with LERETA (an acronym for Lenders Real Estate Tax Service), a tax service and flood service provider headquartered in Covina, Calif., points to the services that his company provides to mortgage bankers, community banks, banks, savings banks, savings and loans, and credit unions - that is, about anyone who makes a mortgage loan.
Thornton emphasizes how LERETA (www.LERETA.com) has had a strong foundation in customer service since it was founded by Richard Quarto and John Hay in 1986, and how this affects its mission and the tools it employs.
Philosophy
The company philosophy has led to the use of new technological tools, particularly the Internet.
Thornton also says it has also been a philosophy that has brought success for the company, which in 13 years has gone from "$3 million in revenue to over $40 million" and during that time has achieved consistent profitability.
LERETA's emphasis on customer service has also resulted in it using technology to provide tax service and flood certification services to its clients using the Internet. Thornton says the Internet has made it possible to rapidly transmit data, allowing a customer to sign up for a tax contract instantaneously.
More importantly, however, the service allows the customer to create reports and letters from the Net and to "populate" (populate is a computer term meaning to put data into computer records) tax information about the property from LERETA's database.
This ability to populate eliminates the need to transmit an application or wait for the company to send information back to the customer via computer medium or a "green bar report." The tax reports and contracts can then be obtained from the Internet site without a wait for a hard copy.
This Internet application allows the customer wishing to obtain a flood certification to request such a service over the Internet. Not only does this reduce the necessity for the transmission of a hard copy application and the attendant delay of sending and receiving information through conventional means, but also allows LERETA to "populate" the flood certification fields electronically without human intervention.
Thornton says this Internet site also allows the customer to prepare various reports. Although many reports are standard and cannot be modified by the customer for obvious reasons - such as "changing the amount due the taxing authority," as Thornton explains - the customer can obtain information using custom queries.
However, since the customer is using "thin client" architecture (a thin client is a computer network connection where the PC serves as a terminal), the manipulation of data by LERETA's database is transparent to the user. An Oracle database is used to manipulate the data.
The emphasis on technology and use of the Web allows LERETA to address niche customers. Many small users, such as community banks and credit unions, are also concerned about customer service and need the information that the company provides. Through this Internet service, these smaller users are provided tax service and flood certification at reasonable prices.
Through ASP, LERETA is able to be the application service provider for tax services and escrow services and its use of the Internet only increases that functionality. It is also a business-to-business provider, since it sends data from taxing authority (a business for this example) to another business, in this case the mortgage servicer.
Using the net
James C. McDonald, chief technology officer for Southfield Michigan's McDonald Computer Corporation (www.mcdonaldcorporation.com), says that his company has "been, effectively, an application service provider since we started in É 1976 - long before the term application service provider ever existed."
As some others have concluded, the ASP model may bring the computer revolution around full circle back to the provision of service bureau services, although the ASPs will provide the new services over the Internet.
Although McDonald Computer Corporation is not technically a provider of escrow services its approach to offering Internet-based Web services provides some interesting insight into how a company can provide services over the Web.
In addition, the company does provide some escrow related services through its
myloaninfo.com portal, which allows mortgage servicers to view customer loan data and place certain customer service information, including escrow data, on the Web for retrieval by mortgagors.
The obvious benefit to this service is that the mortgage servicer's employees can spend more time on other servicing issues as opposed to answering questions about the escrow account or any other customer information.
In smaller shops, since almost everyone acts as a customer service representative, those
employees who work in escrow administration can spend more time on providing these services. A mortgage company using this service does not have to use McDonald Computer's servicing system, although it was first designed to work with their system.
The company has also demonstrated its belief in the potential of the Internet by providing a complete servicing system over the Net.
Although the company started business in 1976, the web application, called Servicing/T.I.M.E. was introduced in 1999, and all the company's new customers "have opted to use that system." This system, among other things, provides interfaces with tax service providers, insurance companies, and MIP companies so that those applications are virtually seamless for customers that use their system.
The obvious benefit to this service is that the mortgage servicer's employees can spend more time on other servicing issues as opposed to answering questions about the escrow account or any other customer information.
In smaller shops, since almost everyone acts as a customer service representative, including those employees in escrow administration, more time can be spent on escrow work. A mortgage company using this service does not have to use McDonald Computer's servicing system, although it was first designed to work with their system.
Commenting on the Internet, McDonald says, "We think the more people who can integrate the Internet into their processes -in a smart way - the better off they are going to be in the long-run."
Any use of the Internet now brings up the question of privacy. McDonald explains that his
company is concerned about security and because of that requires that "all our customers that É [access] our cores services via the Internet do it through a strongly encrypted VPN connection."
McDonald Computer uses VPN (virtual private networking) technology and the IPsec
(Internet Protocol security). IPsec is a way to authenticate users and encrypt data passing through the Internet. Cisco, one of the large providers of network hardware, offers the IPsec protocol in its systems.
Continued on Next Page...
