The Never-Ending Quest Continues
Technology is bringing servicers closer to a never-ending mecca: lower costs.
BY JULIUS FABRINI
The popularity of making comparisons, similes and analogies and of basically saying one "thing" is like "something else" will probably never lose its appeal. In this spirit, here's another one to consider: servicing operations are like flood gates - work flows like water, distributed down various canals, stopped by a dam until the gate is opened, and then it flows on to the next step in the process.
These so-called canals or channels - some might call them the life blood of servicing - are being constructed, modified and enhanced by an evolving technology industry, hand-in-hand with servicers, increasingly producing higher levels of workflow efficiency and rapid capabilities. With the availability of these new channels, the flow of work from origination to servicing and, indeed, throughout the entire cycle of back-office operations is enabling servicers to reduce their costs, an ongoing mecca of the industry.
The key elements of technology's role in the lowering of the cost of servicing include the facilitating of information transferral from one point in the servicing channel to another. The process of providing data in an optimal, efficient time period, in many instances on a real-time basis, is crucial for cutting costs, according to industry experts.
It should come as no surprise that the Internet and interactive workflow capabilities have been cited as two integral technology components for reducing servicing costs.
The Internet continues to hold a high profile - and for good reason. Despite some "fall-backs" by some mortgage technology players in this area because of increased investor demands for concrete results, the Internet is expected to provide increased efficiencies and capabilities, according to industry experts.
In particular, experts tell SM that the growth of Application Service Provider (ASP) environments via the Internet will continue to to grow. With ASPs, companies can have the capability of running applications from their Internet browser, without making hefty up-front investments for technology, such as hardware and technical support. In most cases, a company pays a rental fee or subscription for using an ASP.
Whether it be Internet applications or workflow-enabling software systems, experts indicate the slicing and dicing of costs is fulfilled when certain goals are accomplished, including:
- automation, eliminating manpower, redundancies and time-consuming labor by hand,
- rapidity of workflow, including updating, transmitting of data, including downloading, and eliminating stopgaps and interruptions,
- compatibility, ensuring the new technology and/or applications interfaces with existing systems, and
- access to data by all who require it in the servicing channel.
"Intelligent automation - that's one of the big components," says Fred Melgaard, product manager, loan servicing, at Bellevue, Wash.-based Interlinq Software Corp. "If you can take people out of dealing with the ordinary and get it into the exception, and maybe even help them with some of the exceptions, to point out what's wrong or what you may need to look at - that would reduce the amount of necessary labor."
Melgaard continues by explaining that it is important for a servicing shop to employ smart technology investments to cut labor costs and to determine how to do it in a logical, judicious manner. "The problem is judging how much labor is involved (in a task), and it is a little more difficult than just saying, 'here's a price quote on a piece of software and hardware,'" he indicates, adding that Interlinq provides complete assessment services for servicing shops that details how its products can assist in
improving efficiency.
Melgaard says a large operation that is spread out across different locales - even different states - has its own set of priorities and needs that go beyond mere task management. Offices need to be connected to gain the best cooperative and efficient means of accomplishing work, ensuring that distance does not become an impediment, he adds.
Interlinq was the system that best met these type of needs, according to Justin Kirsch, president and chief executive officer of Access Business Technologies (ABT) in Mather, Calif., which was recently licensed to offer Interlinq's MortgageWare system on the Internet in an ASP environment.
"You need an open architecture system in order to turn it into a Web-based system and integrate it with your other existing systems," says Kirsch. In working towards the goal of cutting servicing costs, his company integrated the MortgageWare system with its own systems, such as accounting and collections, and molded it into a Web-based single-user interface.
"And together, all of those systems, working in unison, created efficiencies that were otherwise unachievable," Kirsch emphasizes. "So from an end-user's perspective," he continues, "they're logging on to one system and accessing real-time information, no matter from what technical perspective or what system that information is contained in. So a user doesn't have to open three different systems on their desktop and toggle back and forth between those to get their job done, and re-key information from one system to another. They open one-user interface, and all the information they need is right there at their fingertips."
Flowing
One of the keys of understanding how to use technology to lower servicing is to take a closer look at how servicing tasks flow from one channel is another, and the fewer stop-gaps there are, the less times a gate fails to properly open (to use the earlier analogy). This results in greater efficiency and the subsequent lowering of costs.
This issue is addressed by Sadu Thinakal, president, Fiserv Mortgage Servicing Systems in South Bend, Ind., who states that the process must be primarily considered as a data exchange among all the participants in the servicing industry, from the first link in the chain to the last. This chain includes investors and guarantors, but it then goes down the line to include third-party service providers such as attorneys, tax and insurance companies. "During the course of business, each party handles a different
piece of the borrower's account," Thinakal explains. "As each entity handles a facet of the mortgage servicing process, they generate updates. In the past, each participant had to update duplicate sets of files for each borrower, requiring duplication of data entry tasks among all the participants.
"Fiserv has harnessed the power of the Internet to potentially eliminate duplication of efforts and allow participants to share work," Thinakal continues, pointing out that this work sharing process is enabled by Fiserv's mortgage servicing system, MortgageServ. This browser-based system connects participants via the Internet for such functions as making updates to loan level files on the servicer's database, thereby allowing them to eliminate redundancies, he states. The Fiserv system also assigns or shifts work to other participants, such as a servicing manager who may send a queue of default tasks to an attorney and monitor the progress of the tasks, Thinakal explains.
This process of sharing tasks in a seamless back and forth flow, which becomes necessary when required information is missing or needs to be verified, has turned into a focal element in reducing servicing costs, according to ABT's Kirsch. He adds that costs began to drop as the industry's reliance on mainframe technology declined and Web-enabled processes and real-time capabilities began to take over.
Kirsch describes the efficiencies made possible by today's real-time processing environment: "Right now, that account officer who's on the floor of the call center may want to find out if a payment went through and was posted. They're sitting, talking to a customer on the phone. Payment processing is in a totally different part of the country and has already posted a payment against that loan.
"The very second it posts in one geographical location, it's available to the customer service representative in the call center of any geographical location," he indicates.
The sheer simplicity of the Internet concept and how it provides accessibility to inexpensive technological solutions cannot be underestimated, according to Ron Wiser, president of Loan Protector Insurance Services, Solon, Ohio. Wiser's company markets the EasyTrack software system, a client-server-based insurance tracking system that offers real-time insurance updates, as well as the capability to handle complex, multi-collateral, multi policy and coverage loans.
Integrated with the Internet, it has dozens of pre-programmed reports, including a user-defined reporting capability, which allows a non-programmer to compile any report using any selection criteria desired. All of this is done via the company's Web site.
"EasyTrack allows our clients to fully outsource the tedious job of receiving insurance mail and updating insurance status on their loan servicing system," says Wiser. "This reduces the number of employees needed to service a portfolio." Servicers are able to maintain control over the process by obtaining real-time reports via the www.loanprotector.com Web site, including individual insurance documents.
The role of efficient work flow in servicing is a fundamental one, according to Susan Casillas, vice president of sales and marketing in ALLTEL's strategic solutions engineering unit.
Efficient workflow is extremely important "to the overall savings within servicing," says Casillas, who, as a former servicing executive, has been at the forefront in research and development for servicing systems at ALLTEL. "Consider that most servicing operational functions, about 90%, are performed daily by individuals who retain the necessary business processes within their brain, and only 10% gets performed through technology."
A reversal of these percentage is being brought about by ALLTEL's MaxMilion Director suite of products, says Casillas, who points to its capabilities of automating the business processes, "so only 10% or less are exceptions and forwarded to a human individual for handling. Automated workflow solutions, internal and external, to operations will continue to grow in importance as e-commerce and electronic
signatures become integrated into servicing operations."
ALLTEL, which boasts of providing loan servicing automation for more than 20 million mortgage loans, has also emphasized its delivery of customer service via the Internet, offering its clients mortgage loan information online.
"Our clients have experienced between 10% to 40% reduction of telephone calls into their customer service department within the first 90-120 days," says Casillas, who notes its importance in reducing costs.
Plugging in
The Internet is being employed by Landsafe Inc. of Rosemead, Calif. as a means to deliver efficiencies that were unheard of just a few years ago, according to Michael Faine, president and chief operating officer.
In commenting about the low-cost access provided to its Internet-available services, Faine says, "We have provided a vehicle for them (customers) to get in and interact with us very efficiently and quickly. And, in addition to our Web site, we also have in development a new production process that is going to take our (client) companies and merge them into a common database, and we can plug customers in immediately that want to go directly online with us, and they don't want to go through the Web site. So, we're coming at this in various different ways: We're offering the Web site to those customers who want to use the Web, and we're also preparing this new production platform.
"We're trying to be pro-active by developing connectivity with the major loan origination platforms, so if we go to a major lender and they say they use 'A,B,C' software, we can say, 'Fine, we've already plugged that in,' and we can be fully ready."
LandSafe was also preparing to launch a new service, a default title order tracking system on the Internet, which Faine says will provide servicers with the ability to obtain status information and to place orders for a default title via the Web.
One of the key elements of this new service will be "the ability to see incremental status and tracking, so you know where that file is sitting, whose desk it is on, what's going on with it, and the ability to see what charges there are, which of course you have to account for with your investor, so it will all be easily available online. All you'll need is a Web browser," Faine points out.
Integration of services is a primary strategy of LandSafe, which recently introduced a plan to integrate all of its services and functions on the Internet employing a common platform, thereby providing access to all of its various product offerings, including appraisal services, flood determination, home inspection, and escrow services. Status reports can be obtained on multiple requests without going to different screens for each one, Faine adds.
The issue of providing rapid automated reports for tasks is also addressed by another company, Lenders Support Systems Inc. (LSS), based in San Diego, which markets LOANbase Servicer for Windows.
With this product, LSS offers servicers an easier method to tracking loans with escrowed taxes and hazard insurance and providing the borrower with an annual analysis, says Dan DeMarco, executive vice-president for sales & management for LSS.
"Our system handles the servicing of these accounts in a very efficient and timely fashion with easy to read screens," De Marco explains. "Our clients need only enter the
escrow/impound detail once, and our system will notify the user when bills are due to be paid and when the borrowers annual analysis is due. Then, with the press of a button, our system will provide the borrower with the last year of escrow/impound history, next year's projection and a copy of the previous years projection to compare with the actual escrow/impound history." He adds that those lenders that do not escrow for taxes and hazard insurance can also benefit from payment monitoring and reporting capabilities.
In some instances, technology is changing the established models for doing business. According to San Francisco-based Interpraise Inc., such is the case with its first product, the Interpraise 3035 Appraisal. Interpraise states the 3035 Appraisal, ordered and obtained through an Internet transaction at www.Interpraise.com, is the first to provide a highly accurate appraiser-based valuation for less than $150 to compete directly against a Broker Price Opinion (BPO).
A study Interpraise conducted, with the participation of four major lenders, comparing its appraisal method with a BPO, shows a servicing manager can recover an average of 8% of a property's value for every Interpraise appraisal. The company indicates it Web-enables their customers, suppliers and vendors, successfully eliminating several layers of costs.
"Interpraise's Internet technology solution provides a significant advantage in ordering, tracking and fulfilling appraisal orders, as well as effectively re-configuring the industry cost structure," says Graham Bryan, chief executive officer. "One of our goals is to be the lowest-cost producer of appraiser-based valuations, which is very different from being the lowest cost provider. Traditional AMCs (Appraiser Management Companies) will have a very difficult time transitioning to be competitive and profitable in the age of the Internet."
The quest for lowering servicing costs is an ongoing one, and technology will continue to play an important role, according to industry executives.
There are so many inefficiencies right now," says Melgaard. "
"Walk into a company and ask the CEO who's looking to gain some efficiency - to walk onto the floor of any department, to go to a printer and watch. Someone is going to print something out that they're using to do their day-to-day job. Follow them back to their desk and see what they do with it," he suggests, noting that this paper-based system is too expensive to maintain, particularly when there are better ways.
"When you have paper, especially forms, and they're not centralized on your Internet or Intranet, then you have problems," says Melgaard. "Ask yourself this question: 'Why are we doing things this way?'"
Many servicing managers and executives will be asking that question as the quest for lower costs continues.
This article was previously published in the January 2001 Issue of Servicing Management
