How To Build A Residential Mortgage Loan Servicer Platform
[1]  Licensing

  • Obtaining mortgage servicer licenses in 34 states and governmental approvals, HUD, Fannie Mae, Freddie Mac, Ginnie Mae
  • Obtaining mortgage servicer license exemption confirmations in 16 states
  • Obtaining collection agency licenses in 20 states if servicing both performing and nonperforming loans
  • Obtaining collection agency license exemption confirmations in 30 states

[2]  Profile & Ranking
residential mortgage sub-servicing business

  • services own portfolio, Ginnie Mae, Fannie Mae, Freddie Mac, Other MBS, Client/Private
  • subservices residential mortgage loans in all 50 states in the U.S. for banks, thrifts, and mortgage companies
  • management team
  • solid internal controls
  • risk management
  • solid policies and procedures
  • extensive and comprehensive training programs
  • demonstrated default management expertise
  • excellent level of automation
  • effective use of technology
  • technology
  • applications
  • processes to improve its operating efficiencies through reengineering
  • investing in technology
  • automation
  • solid management team
  • default management expertise
  • reliable internal controls
  • prudent loan servicing practices
  • extensive and comprehensive training programs
  • employee development
  • approved seller/servicer with the Ginnie Mae, FHLB, Freddie Mac, FHA, and Fannie Mae.

[3]  Management and staff recruiting, development and training

  • well-seasoned management team with acceptable turnover rates
  • management team: Senior managers - staff turnover at 10%
  • mortgage servicing functional training
  • comprehensive training curriculum for all new hires
  • continuing education for tenured employees

[4]  Internal controls

  • sound controls for developing, drafting, and disseminating its servicing policies and procedures to the servicing staff
  • Policy and procedure (P&P) manuals are well written and concise
  • internal audit, risk management, and quality control programs designed to identify and resolve risk issues
  • As a subservicer, adher to agreed upon client service-level agreements (SLA) and associated policies and procedures
  • Internal audit developed functional risk rating matrixes that are formally updated annually
  • Risks are categorized as gross risk, control assessment, and residual risk
  • four tier rating ranges of low, moderate, significant, and catastrophic, which is assigned to residual risk should an estimated loss exceed an established amount
  • The risk rating determines the frequency of functional review
  • audit frequency based on risk factors, frequency schedule within 12, 24, and 30 months aligned with risk categories of high, moderate, and low
  • audit and quality control execution provides safeguards and controls to mitigate financial exposure to the company and its investors against risk of loss associated with noncompliance with investor or regulatory guidelines
  • Audits of loan-servicing operations are performed throughout the year and GSE audits are conducted on a scheduled basis
  • Additional controls and alarms are in place to support servicing include a host of key performance indicators (KPIs) that are employed to provide management with statistical data points relative to the activity being performed
  • Audit methodology includes:
  • monthly risk performance monitors identifies potential weakness and threats;
  • Quality control and internal audit testing of all major servicing activities;
  • Documented findings and recommendations for enhancements and corrections are submitted to loan servicing management for review and action plans;
  • Databases track action plans and open items;
  • Periodic meetings with loan servicing management focusing on open action items

[5]  Technology

  • automated environment with effective systems that use a combination of vendor and proprietary systems: primary servicing system [“PSS”]
  • peripheral workflow products, allowing for transitional reporting and interfacing
  • PSS architecture is scalable to accommodate growth as business increases and the applications employed enable to contain operating expenses, improve productivity, and maintain a robust, flexible, and mobile work environment
  • PSS architecture:
  • Loan servicing records are housed in the PSS
  • A proprietary customized private label Web for clients
  • Predictive dialer coordinates various calling campaigns
  • PSS is used for electronic foreclosure communication with attorneys
  • An Internet bill paying system is used to create bill payments associated with bankruptcy and foreclosure billing transactions
  • FannieMae Home Saver optimal workout recommendation software
  • Freddie Mac Early Indicator™ and Fannie Mae Risk Profiler (SM) credit scoring and behavior modeling software identifies and incorporates higher-risk loans into calling campaigns
  • BANKO® and PACER are used to electronically ascertain new bankruptcy filings
  • Recon facilitates mortgage reconveyances
  • Electronic inbound and outbound desktop faxing
  • Automated call distribution (ACD) and voice response unit (VRU)
  • telephony features skills-based and intelligent call routing, and custom menus and messaging
  • Document imaging is used to store critical information and improve overall efficiencies
  • Continuous monitoring and filtering software, interruption detection, and high-availability redundant firewalls for security
  • File encryption is used to secure file exchange
  • disaster recovery and business continuity plan in place consisting of: A fully developed plan with a hierarchy of critical business functions and calling tree; Redundancy is established for critical business functions between two Cenlar locations; simulated disaster recovery testing that is performed three times annually with every user department engaged in the practice; System backup tapes that are produced daily and stored at an off-site archival facility.

[6]  Loan Administration

  • Portfolio: number of loans
  • Amount of outstanding balances of loans
  • geographic diversity of the servicing portfolio

[7]  New loan boarding

  • proprietary Web-based new loan set-up template that allows for nearly 100% of new loans to be boarded electronically
  • Electronic data transfer expedites the boarding process and reduce errors associated with manual input
  • Each client is assigned a specific identification code that aligns with the respective client's product profile
  • Prior to updating the service system with new loan data, a host of data edits is performed to ensure the data elements meet or are within established standards
  • performs a 100% document-to-system validation
  • Key Performance Indicators include:
  • Customized client-specific letters including welcome letters, which are generated and mailed within two days of boarding
  • welcome calls when requested by the client
  • 100% of loans are interfaced within seven business days of closing
  • Imaged files are received within 10 business days of interface
  • Control reports identify exceptions that are tracked until resolved
  • 10% of ARM loans are audited on a monthly basis
  • 100% of balloon resets are processed and managed according to note requirements and reviewed by two levels of management before execution
  • ARM index values are reviewed and verified on a daily basis
  • conversion department oversees loans transferred from prior servicers or originators
  • Responsibilities include:
  • Orientating clients with business processes
  • Notification to internal departments
  • Rehabilitating received data to ensure smooth transition to the servicing system
  • As a third-party servicer, transfer loans to other servicers: developed programs, task lists, and control schedules that streamline and expedite the de-conversion process
  • Aspects of de-conversion include: Goodbye letters generated and mailed within RESPA timeframe; reconcile escrows and wire funds; forward investor reporting cutoff reports and reconciliations; and forward related servicing files.

[8]  Cash management and investor accounting

  • payment processing unit has solid controls in place to minimize risk of loss due to posting errors or fraud
  • A third-party lockbox provider provides lockbox sites
  • electronic and lockbox payments represent an effective and efficient way to minimize risks associated with manual payment processing
  • payment controls are characterized by the following:
  • Payment processing is located in a separate wing of the servicing facility
  • A monthly billing statement, reminding customers that their payment is due, provides financial information, such as payment posting date, interest paid, and other information
  • Monthly statements also permit expedite lockbox address changes if desired
  • An electronic payment delivery alternative is available for customers through a third-party vendor
  • Daily desk examinations eliminate unprocessed payments
  • Electronic payment uploads from clients who accept payments through their respective offices
  • Borrowers have a number of payment options, including Web-payment capability; Automated payoff quotes through its VRU,
  • Payment Sources: street mail, ACH, E-payments, Lockbox
  • Administration of investor reporting and remitting
  • controls in place to protect investors from risk of loss that may result from human error or fraud
  • Risk management practices in place include: Segregation of duties among employees generating investor reports, investor remittances, and performing bank account reconciliations
  • Management reviews investor reports and bank account reconciliations
  • automated data-gathering process with no manual data manipulation, thereby maximizing integrity of information reported to investors
  • Online access to bank statements, which eases the reconciliation process

[9]  Escrow administration

  • escrows on servicing portfolio and lender placed hazard and flood insurance
  • outsourced relationships with insurance and tax vendors and exercises effective managerial control over its vendors
  • Other controls in place include:
  • Full outsourcing of real estate tax bills as well as hazard and flood insurance policy procurement through two vendor relationships, thereby optimizing cost efficiencies
  • Vendors perform proactive calling and letter campaigns prior to and subsequent to the expiration date of insurance and tax due dates for escrow and non-escrow customers
  • Established service level agreements (SLAs) with vendors to adhere to daily performance standards
  • Vendors transmit daily disbursement requests, which are reviewed for accuracy before funds are disbursed
  • Tax payments are paid within the discount period, with the majority paid electronically
  • Tax payments will be advanced on non-escrowed loans if borrower is 60-days delinquent on the tax payment, and the borrower is advised the account is converting to escrow
  • Proprietary tax penalty tool that allows for identifications of trends and fault patterns
  • All non-escrow loans with coverage types for flood, windstorm, and unit owners are tracked for continuous coverage on an annual basis
  • Performance scorecards are generated for tax and insurance vendors and weekly conference calls are conducted with vendors.

 

[10]  Customer service

  • customer service department is well automated, using technology that includes ACD, VRU, and Internet capabilities to provide a competent level of service to its customers
  • staff of employees and contracts with a third-party customer service vendor to support additional call volume at historically high call volume times
  • six-week training program for all new employees
  • Vendor customer service representatives receive training and are closely monitored
  • As a subservicer, maintains SLAs with its clients to administer customer service
  • solid level of customer support as evidenced by:
  • a low customer service turnover rate
  • VRU is multifunctional 24/7
  • good capture rate
  • highly proficient first-call resolution rate
  • Customer service representatives are graded and scored based on a developed scorecard
  • The scorecard is used to critique each employee's performance surrounding accuracy, timeliness, and resolution
  • Toll-free telephone numbers are provided to client customers
  • skill based technology is employed to channel incoming calls to a representative that aligns with pre-established determinants
  • Bilingual representatives provide customer service to Spanish-speaking borrowers
  • Customers may leave a voice message after normal operating hours
  • An internet Web site is available, allowing clients' customers to obtain static data, electronically communicate, and update contact information
  • Responses to voice massages and e-mails are within 24 hours
  • Clients specific e-mail boxes and telephone hotlines are available
  • Customer correspondence is reviewed for content accuracy, grammar, and private label correctness
  • Respond to credit reporting disputes on performing loans electronic
  • Desktop access to imaged documents enables timely responsiveness
  • trending analysis of customer telephone, written inquiries
  • Internet contact to monitor service issues, analyze workflow demands, and identify training needs
  • Sound staffing model to plan and control staffing needs based on patterns and trends of incoming calls
  • Mortgage reconveyance processing is effectively managed to mitigate risk of loss due to a failure to comply with state reconveyance timelines
  • Reconveyance Processing Software to prepare its release packages as well as prioritizes reconveyance workflow based on state timelines and aged items based on risk exposure.

 
[11]  Default management

  • collection department is staffed with experienced employees
  • Loan counselors receive nearly 160 hours of classroom and OTJ training and all loan counselors receive FDCPA refresher training and are re-certified annually
  • Collection calls can begin at one day past due base on risk and/or client guidelines
  • methodology to mortgage collections has enabled it to maintain delinquency rates at industry and peer-group competitive levels
  • Loan counselors work acceptable weekday and weekend shifts
  • align collection incoming call statistics towards customer service incoming call statistics
  • The customer service department may handle inbound collection calls less than 30-days past due; otherwise, direct inbound collection calls are handled by loan counselors
  • Loan counselors are partitioned according to experience levels
  • Through skill-based routing technology, high-risk and 30-plus day delinquent accounts are identified and channeled to seasoned loan counselors
  • arranged with a third-party payment vendor to administer borrower payments through a number of payment options
  • collection process include:
  • Low Loan counselors turnover rate
  • Freddie Mac's Early Indicator® credit scoring and behavior modeling software to identify and incorporate higher risk loans into call campaigns
  • Fannie Mae's Risk Profiler®, which is a behavior-scoring model that identifies borrowers most likely to default
  • Extended evening and weekend hours to canvas geographically diverse portfolios
  • Autodialer technology is used to coordinate calling campaigns and effectively manage productivity
  • Overall right party contract rate
  • silent monitoring of loan counselors encompassing 20 telephone monitoring sessions, monthly
  • Reasons for default are recorded, which provides guidance for loss mitigation
  • Monthly reporting to credit bureaus
  • Property inspections are ordered according to investor guidelines or when customer contact has not been secured
  • Monthly performance incentive and reward and recognition programs
  • Delinquency Statistics: 30 days, 60 days, 90+days, foreclosure, bankruptcy
  • monitoring of roll rate migration tracking for 30-, 60-, and 90-plus days past due assists collection management in determining staff allocation, production effectiveness, and other management information that can be used to improve default management
  • "Planet Code" technology determines the cost/benefit of such implementation. This technology identifies payments in the mail stream and would enable the collection department to suspend collection attempts for a prescribed time period and focus their collection efforts accordingly
  • The loss mitigation department is staffed with experienced employees
  • Loss mitigation activities are proactive, with customer service and loan counselors educated to identify and refer loss mitigation candidates in the early stages of delinquency
  • Targeted mailing and calling campaigns are executed and tracked enabling management to focus on primary rescue opportunities
  • Various tools are employed, such as Fannie Mae's Web-based Homesaver application, to identify possible workout solutions. borrowers can submit a financial package via the Web
  • Controls in place include:
  • Loss mitigation efforts may begin at the 45th day of delinquency or in accordance with client guidelines
  • Breach letter may begin as early as the 35th day of delinquency, but no later than the 65th day of delinquency
  • The net present value is manually calculated to determine the best workout scenario
  • Management review of 100% of loan modifications
  • Buy-down loan reconcilement monthly
  • Recommendation for foreclosure is formally presented to management for review and authorization to proceed or alternative recommendation
  • Monitor the recidivism rate for workouts that cure and re-default within six months
  • Workouts:
  • Deed-in-lieu
  • Short Sale
  • Paid-In-Full
  • Modification
  • Forebearance Plan
  • Forebearance Fully Current
  • Aggressive management of its foreclosure and bankruptcy processes to maximize timeline management
  • The foreclosure and bankruptcy departments are staffed with experienced employees
  • complements its foreclosure and bankruptcy departments by contracting with vendors to perform various and sundry processes that allows for greater flexibility of foreclosure and bankruptcy proceedings
  • A detailed analysis is performed on each loan recommended for foreclosure to ensure that all loss mitigation attempts are acted upon before proceeding with foreclosure action
  • Effective collection efforts, loss mitigation diligence, and value analysis should resulted in an excellent annualized foreclosure cure rate
  • Foreclosure file referral to attorneys is accomplished utilizing the LenStarTM system for electronic-file referral and case-status monitoring and attorneys electronically upload file status to effectively monitor foreclosure timeline performance
  • New Invoice is employed for attorney bill paying
  • Foreclosure timeline performance is within Fannie Mae and Freddie Mac guidelines
  • Administered bankruptcy controls include: BANKO is used to electronically ascertain bankruptcy filings; PACER is utilized to electronically access court records for case updates and monitors the status of caseloads
  • Proof of claims filing has been delegated to attorneys
  • Motion for relief is file at 90 days past due or in accordance with investor guidelines
  • As a subservicer, clients direct the administration of REO properties
  • REO properties listed with an asset management company and maintains close oversight of the marketing and sales activities
  • REO department has industry experience
  • Detailed polices and procedures to monitor the assets and vendor activities designed to minimize losses on properties as evidenced by the following:
  • One interior, post-acquisition valuations to determine asset value and list price
  • Management approval of marketing plans
  • Cost-benefit analysis matrix for determining property repairs
  • Closely monitored vendor performance to meet established service-level agreements
  • Broker contract generally limited to 90 days or in accordance with client guidelines
  • Daily, weekly, and monthly managerial reports that measure performance to established goals
  • Cash for keys to avoid protracted eviction proceedings and expedite marketing time
  • Established approval matrixes that include sales decisions, property preservation, and cash for keys with the objective to maximize recovery

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[12]  Financial Position

  • sufficient financial strength to sustain the servicing operations for the next 12 to 18 months.

 

Mortgage Servicing Companies Cannot Engage in Servicing without Mortgage Servicing Licenses

As the Subprime Meltdown takes it effect and over 263 Mortgage Companies have imploded, critical liquidity  is entering the industry through hedge funds purchasing distressed mortgage pools containing both performing loans and nonperforming "scratch and dent" loans.  These passive investment pools are required by law to obtain from 11 to 15 mortgage lender licenses [where lender is defined broadly to include "acquire"] to be legal and eliminate regulatory liablilty to its investors.  These "scratch and dent"morgage pools are being purchased at major discount allowing room for foreclosure prevention through loss mitigation [both repayment plans and loan modifications] and resale of the reperforming loans at significant profit.  Some are also employing refinance as a way to rehabilitate loans and increase their resale value.  This additional capability will require mortgage lender licenses. 

Companes are also building their own mortgage servicing platforms rather than trying to purchase existing servicing platforms.   Pure servicing companies require 34 mortgage servicer licenses and 16 collecion agency licenses to avoid regulatory shut downs.  Mortgage servicers with refinance capabilities require an additional 35 mortgage lender licenses for a total of 85 licenses in order to be fully regulatory compliant.  We are the leading mortgage licensing company assisting mortgage servicers obtain the necessary licenses in the shortest amount of time by using an automated online mortgage licensing engine. We are currently engaged in 13 national mortgage servicer licensing projects each of which are pursuing between 50 and 80 licenses  

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