The recent MBA Mortgage Servicing Conference in San Diego, at which the talk of loan modifications was front and center, reminded us of an article published in the November 2009 issue of Mortgage Banking magazine titled “Servicers as Originators” [requires subscription]. That article described the most significant recent development in the world of mortgage servicing: the need for mortgage servicers to act like mortgage originators as they re-underwrite loans under various loan modification programs such as HAMP.
While loan modifications are not new, the sheer scale of pending loan modifications has overwhelmed servicers and drastically extended processing times. At the same time, critical scrutiny of the process and pressure to accelerate the pace of completed modifications, has created fertile conditions for a new loan quality disaster.
Image by Matthieu
This represents a vastly more complicated “servicing” process than traditional servicers are used to. Indeed, the modification process is arguably more complex than the origination of a new loan, requiring a re-underwriting of the loan, complete with credit reports, appraisals and verifications (income, asset and employment). All this in addition to program-specific documentation requirements, which in the case of HAMP, are onerous.
Recognizing this requirement for a different skill set, servicers have been hiring servicing reps with origination experience. Thus, much of the production staff of now defunct mortgage lenders have new gigs as servicing staff, no doubt helping unemployment numbers in subprime epicenters such as Irvine, CA.
In addition to massive new hiring, servicers are deploying new or modified software systems to automate what they can; outsourcing various sub-processes where they can; and trying to stay in compliance as program guidelines change. Which they do, frequently.
As servicers struggle to meet these challenges, it falls on auditing and quality control professionals to ensure that the latest processes and compliance requirements are adhered to. Unfortunately, this is not an area where software vendors have invested much time or effort. Except Cogent, as it happens.
Cogent’s ServicingQC system was introduced more than a decade ago and has evolved into the most sophisticated quality control system available for servicing operations. Moreover, with the release of the CogentQC.NET platform, virtually all of the functionality of Cogent’s ProductionQC system – designed to monitor origination quality – can now be embedded into a ServicingQC system. Result? A ready-made platform for servicing quality professionals to monitor their new “servicing” process: loan origination.