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.
...Continued from Previous Page
Outsourcing
Creation of outsourcing alternatives is another tool that has allowed for increased efficiency and cost-savings for servicers, according to industry executives.
Karen Larsen, director, marketing communications for Dallas-based Transamerica Real Estate Information Companies (www.transamerica.com), emphasizes the advantages brought about by InUnisyn: "the result of a strategic alliance between Transamerica Real Estate Tax Service and [the] Assurant Group." Transamerica is well known for tax services and the Assurant Group writes various forms of specialty insurance.
According to Larsen, "InUnisyn represents the mortgage lending industry's First combined
escrow management program." InUnisyn, she continues, "combines the property tax service strengths of Transamerica Real Estate Tax Service with the mortgage property protection services of Assurant."
This new endeavor will work somewhat like the tax service that servicers are used to. That is, the servicer will pay the administration fee up front but, unlike the tax service administration fee, InUnisyn will provide both tax and hazard insurance administration. To simplify billing, Larsen says, "Transamerica Tax will serve as the single point of billing."
InUnisyn plans to expand in the future with other outsourcing and escrow services. Larsen indicates that "this alliance promises development of additional products and technology solutions such as a single exchange of data, escrow analysis and private mortgage insurance processing." Obviously, this technology will increase the efficiency of the servicing department. Transamerica Tax has also entered the escrow account customer service field by establishing call centers that allow mortgagors to call Transamerica Tax rather than the servicer regarding escrow account inquiries.
Larsen describes this as a "mortgage servicing industry first" and characterizes, "the borrower call center ...[as] a value-added outsourcing product for our customers offering them greater efficiencies at reduced operational costs."
Insurance services
As the new venture by Transamerica and Assurant indicates, the escrow services industry recognizes the potential of the outsourcing of escrow administration services. It was not that long ago that when you mentioned escrow services that tax service was the only thing that came to mind. However, that is no longer the case; insurance is now an escrow service area.
Charles Nelson, president of Birmingham, Alabama's Cason Financial Corporation, says the
company "provides insurance related products" related to insurance that protects the mortgage lender's collateral, says Nelson.
One such product is "lender placed or forced placed insurance." The company provides this forced place insurance to protect the mortgage lender's interest should the hazard insurance policy lapse, for whatever reason.
The company also provides what Nelson calls "hazard insurance department outsourcing." This is "a labor intensive process" and Cason through economies of scale makes the process less so and can do it cheaper than the mortgage company can.
In their contract with a servicer, Cason will take over all functions of the insurance department including payment of the hazard insurance bills (however, Nelson indicates that most mortgage servicers, while willing to outsource almost everything, generally retain the payment function). "We actually take over all the work they performed before", says Nelson.
The work includes tracking such things as cancellations, endorsements, insurance bills, etc. and "react[ing] for [the mortgage loan servicer] according to certain procedures we agreed on beforehand. Nelson goes on to say, "Each program is completely customized for [each] particular institution because every institution does things differently."
Nelson says the benefits of this type of service include the reduction of the servicer's "cost" including space, salaries, and fringe benefits. In addition, the service helps the servicer to maximize its use of its escrow accounts as compensating balances.
Sharing
Finally, the arrangement provides the mortgage servicer with some indemnity in making the provision of insurance services a "shared liability." In other words, both Cason shares the mortgagor servicer's liability to provide services and the consequences if those services are not provided.
The company gets information from the major insurance carriers electronically. Cason
provides information to its mortgage servicers using various electronic means including the Internet or the electronic transmission of data to the company's servicing system (ALLTEL and Fiserv, for example). He also says that they could access data through the Web.
The Internet has engendered many new acronyms and terms, and there will certainly be many more to come. Whatever they are called, the employment of new tools and methods will expand for more efficient delivery of escrow services.
Gary Hutto is president of Gary Hutto Management Consulting, a management and advisory firm specializing in real estate and mortgage banking based in Birmingham, Ala. He can be reached at: (205) 988-4267 or ghuttocpa@aol.com.
This article was previously published in the April 2000 Issue of Servicing Management.
