The “Five C’s” that challenge mortgage servicers: Customizing services

Brian Nihls, Head of Cloud for Mortgage at SAP Fioneer and Rob Lux, CEO of Ranieri Solutions, review the challenges servicers face and how they can be addressed with the Cloud for Mortgage servicing system.

The fourth challenge: Customizing services to their clients’ unique needs and preferences

Brian Nihls— In our last article, we discussed cybersecurity, the third of the “Five C’s” that challenge mortgage servicers.  The Five C’s that challenge mortgage servicers are the critical and sometimes competing priorities of:

• Anticipating customer needs and providing a digital experience that enables self-service
• Ensuring compliance with evolving federal, state, and local laws and agency regulations
• Defending against new and emerging risks in cybersecurity
• Customizing services to their clients’ unique needs and preferences
• Controlling costs while addressing all of the above

This article will focus on the fourth C: Customizing services to clients’ unique needs and preferences. Clients are mortgage lenders and holders of mortgage servicing rights. They have unique requirements and preferences that the servicer and subservicer must accommodate. For example, white-label servicing, regulatory compliance, technology integration, and customer retention strategies are some of the things that need to be addressed.

SAP Fioneer has utilized the latest SAP technology that supports the largest global financial services firms to build Cloud for Mortgage. Ranieri Solutions has contributed industry knowledge and experience, having run some of the largest mortgage servicing firms in the business. Together SAP Fioneer and Ranieri Solutions have built a modern servicing system that was made for servicers by servicers.

Rob Lux — In our last article, we covered Cybersecurity challenges. The next challenge that we will cover is unique to some servicers but especially critical for subservicers. It is the fourth C: Customizing services to clients’ unique needs and preferences.  Some servicers service loans on behalf of others – they are commonly referred to as subservicers.  In 2024, one in three loans (nearly $4 Trillion of UPB) were subserviced, an increase from one in six loans back in 2017.

White Label Servicing

Subservicers have one of the most difficult jobs in the mortgage industry.  They have two main customers in every relationship: the Client that entrusted mortgage servicing to them and the Consumer, who is the customer of their client.  There is also a myriad of other stakeholders, such as regulators and investors, that they must work with to ensure the mortgages are serviced properly.

To obtain scale and earn income, subservicers service loans on behalf of many clients.  Many of these clients have unique needs that the subservicer must address while ensuring that there is no disparate treatment of the consumers across their operation.  With multiple clients who have multiple needs, subservicing quickly becomes very complex.

Clients outsource to a subservicer for a variety of reasons, but the three main reasons given are cost, regulatory compliance, and technology.

Cost Control

Servicing is often viewed as a cost center and those costs are always being scrutinized.  If loans can be outsourced to a subservicer to reduce the costs, that is often viewed as an effective strategy.  This allows the client to focus on originations.  It also allows smaller firms to enter the business who can’t justify the fixed costs of servicing loans in-house.

Regulatory Compliance

Another factor in using a subservicer is regulatory compliance.  Since COVID struck in March 2020, there have been an average of one thousand new regulations added each year.  Worse yet, many times these regulations are confusing and conflict between agencies.  The legacy servicing technology systems aren’t nimble enough to implement these regulatory changes timely.  This adds risk to firms that can’t fund a separate technology team to build and implement the supplemental systems required to remain compliant.  They also rarely have the necessary compliance and legal staffing to interpret the regulations.

Technology Integration

One of the biggest reasons for firms to subservice has been related to the technology available.  For decades mortgage servicing has required a large investment in technology.  The traditional servicing systems are extremely old and require significant investment in supplemental systems to address deficiencies with their platforms.  Servicers need to invest in or build additional technology to handle default servicing (collections, loss mitigation, foreclosure, bankruptcy, etc.), data reporting, document image access, workflow, and numerous other normal servicing activities.

These various systems need to be integrated, and staff must be trained in how to keep the systems in sync.  This, coupled with the fact that the major mortgage servicing technology systems are decades old and difficult to use, reduces staff efficiency (reduces Loans Per FTE) and increases costs.

Customer Retention Strategies

Therefore, clients are coming to subservicers expecting lower costs, robust technology, and mature regulatory compliance.  But that’s not all.  Some clients require the subservicer to integrate seamlessly with their consumer facing marketing to increase customer recapture.  Loan Officers and Brokers want to retain customers when they decide to originate a new loan, refinance an existing loan, or purchase another product such as a Home Equity loan.

To improve customer recapture, some clients want the subservicer to service the loans in their name – referred to as private (or white) label servicing.  This means the subservicer uses the client’s branding (colors, logos, etc.) on monthly statements, letters, and websites.  Further some of the communications may be tailored to that client.  For example, statements may include the name and picture of the customer’s loan officer or broker and the  subservicer’s call center will answer customer calls using the client’s name and unique scripting.

If the client has a private label securities (PLS) portfolio, they may want those loans handled differently than agency loans.  For example, if a consumer requires a loss mitigation program for one of the client’s PLS loans, the client may provide options that differ from guidelines used for Fannie Mae loans.  In these cases, the subservicer needs to ensure that the client’s terms don’t violate any state or federal laws and are fully compliant with all other regulatory requirements.

The life of a mortgage subservicer is extremely difficult.  We strongly believe that our Cloud for Mortgage technology will greatly assist them in reducing costs, remaining compliant, and enhancing both the client and consumer experience.  Cloud for Mortgage was built by servicers for servicers and, having worked at the largest subservicer in the world, I can attest that a product like Cloud for Mortgage will be a game changer for our industry.

Conclusion and Key Benefits of Cloud for Mortgage

Brian Nihls – As the mortgage servicing industry evolves, subservicers face mounting pressures to deliver customized services while controlling costs and staying compliant. Cloud for Mortgage is designed to meet these challenges head-on. Built specifically for the US Mortgage industry, this platform offers a range of benefits that address the complexities highlighted throughout this article:

• Reduced Cost to Service: Cloud for Mortgage significantly lowers the cost to service by streamlining operations and eliminating the need for costly, siloed systems. Aiding in remain competitive while maintaining efficiency.
• Improved Staff Efficiency: With an intuitive user interface, Cloud for Mortgage simplifies staff training and reduces the time spent navigating complex legacy systems.  This results in higher efficiency and less time spent on training and operational delays.
• No Need for Ancillary Systems: Unlike traditional mortgage servicing platforms, Cloud for Mortgage integrates all necessary functionalities into one cohesive system. You no longer need to rely on external systems for tasks like default servicing, data reporting, document management, or workflow management, which reduces the risk of errors and streamlines processes.
• Faster Implementation of Regulatory Changes: Regulatory compliance is a moving target, and Cloud for Mortgage is designed to keep pace with the ever-changing landscape. Servicers can quickly implement new regulatory requirements without the need for costly, time-consuming updates to legacy systems, ensuring they always remain compliant.
• Tailored for Subservicing: Unlike older systems that were adapted for subservicing after the fact, Cloud for Mortgage was purpose-built for this market. It offers the flexibility and scalability required to handle the complex needs of multiple clients, each with their own branding, service requirements, and regulatory obligations.
• Built with Modern Technology: Cloud for Mortgage is a cloud-hosted, real-time system that provides a simple and intuitive user interface.  Cloud for Mortgage is highly configurable to match your unique processes and provides secure access via a rich set of API’s.

In conclusion, Cloud for Mortgage empowers servicers and subservicers to provide customized, cost-effective, and compliant services that meet the diverse needs of their clients. By adopting our modern solution, servicers and subservicers can navigate the complexities of the mortgage servicing landscape more efficiently, enhance the consumer experience, and ultimately achieve better business outcomes.

Rob Lux, CEO of Ranieri Solutions

Rob Lux is the CEO of Ranieri Solutions. He was previously COO for six years at Cenlar, the largest mortgage subservicer in the country, and CIO at Freddie Mac for seven years, where he built an award-winning technology team. He holds an MS in Technology Management from the University of Pennsylvania and a BS in Engineering from Drexel University.

Brian Nihls, Head of Cloud for Mortgage at SAP Fioneer

Brian Nihls is Head of Cloud for Mortgage at SAP Fioneer, with over 19 years of experience in IT, business management and mortgage compliance. He specializes in agile methodologies and tech-driven solutions, helping modernize mortgage servicing.