By Alan Steven Wolf of The Wolf Firm There are three distinct ways that servicers can take advantage
By Alan Steven Wolf of The Wolf Firm (Reprinted with permission from Servicing Management Magazine - August 1998)
Only the brain dead could have missed the amazing story of the Internet. This tidal wave of computer connectivity has been frontpage news for over three years. With fewer than 100 thousand users ten years ago, the internet now hosts an estimated 100 million people who have internet e-mail addresses and over 40 million people who regularly "surf" the web. These growing numbers have caused a bold paradigm shift in the way business is conducted. Just as the airlines replaced the railroads, so too will the internet based companies of today, and their alliances, replace the old.
The production side of mortgage banking has been quick to adapt to this new technology. For example, an increasing number of loans are now originated entirely on the internet at a cost point far below traditional production methods. Whole new companies have formed which solely make internet based loans (see e.g., E-Loan, http://www.e-loan.com). Intuit and Microsoft are entering the game. And the old models are no longer true (more brick no longer equates to more access to borrowers.) The internet acts as a great equalizer, enabling the smallest companies access to millions of internet users. There is not a major mortgage banker that has not thought, rethought and rethought again, its internet strategy. Everyone is scrambling, testing and revising their business models, trying to keep pace with the brave new internet world.
While mortgage companies production arms are hard at work grappling with the internet, their servicing part has been left behind, a step child of sorts--left to its dusty old toys and methods. It is time to wake up to a world much different than any we have lived in before. Quite simply, servicers must adopt internet technologies or die. A servicer which ignores the internet is perfectly suited to a world that no longer exists. The servicing world belongs to those who are now willing to "think outside the box."
There are three distinct ways that servicers can take advantage of the internet: (1) Make complete use of internet e-mail; (2) Provide information on their web site for borrowers and investors; and (3) Obtain information from the vast resources on the internet.
Mortgage Servicers Making Use of Internet E-Mail
It is axiomatic that to be competitive in today's economy, a company must employ internet e-mail. This means providing everyone in the organization with a distinct internet e-mail address and requiring every attorney and vendor to do the same. The efficiencies gained through internet e-mail are amazing. In minutes, e-mail is sent from one desktop to the next, wherever and however situated, essentially free of charge. Telephone tag, voice mail transcription errors and print-fax-receive-distribute models are replaced with a cost-free, efficient distribution system. E-mail is clearly the "killer application" driving internet usage
Today, servicers are using internet e-mail to communicate with their attorneys and vendors, referring cases, checking on status, forwarding documents, asking general questions and the like. E-mail is essentially replacing the archaic snail mail/fax mail business letter, and it is facilitating the creation of intercompany workgroups.
E-mail is also being employed to a lesser extent in facilitating communication with borrowers. Some servicers now provide e-mail addresses of staff so as to enable borrowers to quickly reach the appropriate party. Given the obvious benefits of e-mail, servicers need to do more to encourage this form of communication.
E-mail is not without its problems. Servicers must develop policies and procedures to ensure that e-mail communications do not waive important rights (such as trade secret, attorney-client and attorney work product protections) and that improper statements are not included in e-mail communications. The easy flowing conversational tone of e-mail often lends itself to statements that would never be made in a formal letter or recorded on the notes in a servicing system. Servicers are well advised to carefully consider these problems. For further guidance, see E-Mail Blues at http://www.wolffirm.com/articles/20.htm.
Mortgage Servicers Providing Information on the Internet
The web sites of both Countrywide Home Loans (http://www.countrywide.com) and Capstead Mortgage (http://www.capstead.com) provide a glimpse of our web-based future. Each site has a special section devoted to loan servicing. Here, from any web browser, a borrower can enter an identification number (generally the loan number) and password and obtain up to the minute loan information directly from the servicer's servicing system. The information is formatted in easy to understand screens. Payment histories, escrow and tax analysis, current principal balance and related loan level information is easily accessible. Just imagine a world where borrowers can get their own information, freeing up your customer service desk from the mundane and expensive task of regurgitating onscreen information. That day is quickly approaching. Today Countrywide and Capstead are reaping the benefits of this better mousetrap.
These sites also lend themselves to other interesting innovations. For example, imaged documents can easily be added to web sites, opening a whole host of options for servicers. Instead of mailing or faxing copies of the note, mortgage or other instruments, to borrowers or the servicer's attorneys and vendors, these documents can be viewed and printed from the servicer's web site. Similarly, web sites are beginning to allow investors and master servicers to conduct periodic reviews of the portfolio in real time. This includes loan level information and the actual documents. Information is a driving force in the secondary markets and the web provides a tool to cost effectively provide that information. Finally, mortgage banking web sites are starting to include a listing of REO's resulting from foreclosures (see e.g., http://www.fanniemae.com/Homebuyer/REO). These listings make the information readily available to real estate investors and can result in better returns on the REO's.
Of course, connecting a servicing system to the internet is technologically complex and rife with security issues. A simpler approach is that taken by Allied Group Mortgage (http://www.agmc.com). The Customer Service section of its web site is divided into categories such as "How to Contact Us," "Payment Methods," "Forms Available," "Escrow Information" and "Delinquency Assistance." In these sections, Allied provides a description of its processes and a listing of telephone numbers, snail mail and e-mail addresses, and days and hours of operation. Allied's approach thus seeks to answer some common questions and provide a ready, up to date resource on the best methods of contacting them for further information. Web sites are inexpensive to develop and even cheaper to maintain. There is not a servicer in the country that cannot afford to put this type of information on-line. Do it!
Another interesting use of web technology in servicing is "E-Bill," a concept being promoted by a variety of companies including Checkfree (http://www.checkfree.com/ebill). Instead of printing and then mailing coupons or monthly statements, all of which are very expensive, "E-Bill" provides for the posting of the monthly statement on-line. The borrower is notified of the statement by e-mail, reviews the statement at the Checkfree web site and then by clicking on an icon, the statement is automatically paid by ACH transaction. It is a win-win-win situation. The borrower has a ready-made electronic filing cabinet of all of his mortgage statements, and the borrower can pay these statements easily or e-mail any questions directly from the site to the servicer. The servicer saves the cost of printing and mailing the statements and the lock box fees. (The cost to post the "E-Bill" to the web site is magnitudes less expensive than printing and mailing the statements, and the ACH transaction is less expensive than the lock box) The servicer has the further ability to add functionality to the bills (e.g., the e-bill can include click on e-mail addresses, various marketing literature and direct links to its web site for further information and refinancing options). Of course, the win for Checkfree is the nice profit it makes from this innovative concept. Check it out!
Mortgage Servicers Obtaining Information From The Internet
"Seek and yea shall find" pretty much summarizes what's on the internet. With over 500 million web pages, it is likely that whatever you are looking for is somewhere on the web. Indeed that's the problem. There is so much information that it's often difficult to find the information that you want. Fortunately, several sites have been specifically created to guide mortgage servicers in this task.
The first site, which should be on every servicer's "favorites" list, is the USFN web site (http://www.usfn.org). Here there is a wealth of information freely available to servicers. This information includes a searchable database which details the expertise and pricing structures of the USFN attorneys throughout the country (http://www.usfn.org/dir.htm); a searchable database of articles written by USFN members or written for USFN publications (http://www.usfn.org/articles.htm); and an industry bulletin board where servicers can post questions and have those questions reviewed and answered by servicers and attorneys throughout the country (http://www.usfn.org/index.tcl). If you need to locate competent counsel in a state, or if you need to research a mortgage servicing issue, the USFN site is the place to start!
Another valuable web site is the one maintained by The Wolf Firm, a California law firm (http://www.wolffirm.com). On its web site the firm freely provides all of the following: an on-line mortgage banking library with links to cases, statutes and a variety of reference materials and mortgage industry sites (http://www.wolffirm.com/library); a mortgage banking bookstore which categorizes all mortgage banking related books and allows for the on-line purchase of those books at a discount (http://www.wolffirm.com/bookstore); standard HUD, VA, Fannie Mae and Freddie Mac forms which can be filled out on-line with the use of a web browser and then printed (http://www.wolffirm.com/forms); up to the minute news about mortgage banking matters direct from the wire services and leading mortgage banking journals (http://www.wolffirm.com/news/index.htm); a calendar of all mortgage banking industry seminars, conferences and conventions (http://www.wolffirm.com/calendar/index.htm); on-line training for various mortgage banking areas which includes written materials with hypertext links to key concepts, a multi-choice exam, on-line certificate of completion and e-mail notification to a supervisor that the class has been completed (http://www.wolffirm.com/training); and photo albums of key mortgage industry events (http://www.wolffirm.com/photoalbums.htm).
In addition, The Wolf Firm web site has two databases specifically maintained to aid the mortgage banking industry. The first database attempts to tackle the industry wide problem of a missing assignment discovered just prior to foreclosure sale (the third leading delay in foreclosure) or upon payoff demand (http://www.wolffirm.com/assignment). The solution assumes that if the servicer can contact the party that failed to record the assignment, the problem can be corrected. Thus, the Missing Assignment database attempts to locate the address and telephone number of the errant party. If the party still exits, the database searches the address of over 15 million businesses throughout the country for a matching name, and provides the address and telephone number. If the party does not exist, then the database attempts to identify the entity which acquired the now defunct party. Thus, if the errant assignor were a failed financial institution, the database would show the responsible FDIC office. Similarly, if the search were for Directors Mortgage , the search would show that Norwest acquired Directors.
The second database is known as the Mortgage Banking Employment Opportunities database (http://www.wolffirm.com/employment). Here lists of mortgage banking jobs from throughout the country are gathered and posted in a database which allows users to sort and select jobs by a variety of criteria. In addition, the section provides links to general web-based employment databases, to the classified ad sections of major newspapers across the country and to the employment opportunities sections of the web pages of leading mortgage bankers. If you are seeking employment in the industry, this is the place to go! You can even request e-mail notification of when jobs meeting your criteria are posted. Also, if you are a mortgage banker seeking staff, you can freely post your ads and review resumes of those seeking employment.
Another fascinating and useful site to servicers is Lincs (http://www.attylinc.com). Here servicers can get the case status of their loans in default; all through their internet browser. If your employees have web access and can use an internet browser, they immediately know how to use Lincs.
Alltel has finally caught internet fever and about mid-August 1998 will be offering a web based servicing product known as Alltel Default Solutions ("ADS"). This product will employ web browser technology to provide a true bi-directional interface over the internet between its MSP/CPI system and foreclosure and bankruptcy attorneys. It will also use the web to provide workflow, imaging, tracking and electronic data interchange transactions. (http://www.Alltel.com).
Of course, Fannie Mae (http://www.fanniemae.com/Lender), Freddie Mac (http://www.freddiemac.com/function/fm-lenders/fm-servs/single.htm) HUD (http://www.hud.gov/lenders1.html) and the VA (http://www.va.gov/vas/loan/lenders.htm) have terrific sites filled with useful information. The VA is even starting to post bidding instructions on-line (http://www.vageorgia.com/loan_administration/foreclosurebids.htm) The MBA (http://www.mbaa.org) and Allregs (http://www.allregs.com - be sure to sign up for AllRegs free e-mail notification service of new investor guidelines) also have terrific web sites.
Title companies and mortgage insurers are also starting to provide critical information on the web. For example, at least one title company allows a user direct web access to its property profile information (http://www.niteowl.net). CMAC, the mortgage insurer, allows for web-based queries and transactions (http://www.cmacmi.com/EnterSlink.htm).
What the Future Holds
In the not too distant future, all servicing personnel will be connected to the internet. Internet e-mail will become as common as voice and fax transmissions are today. Web access will be as common as accessing a local hard drive. The internet will create a seamless web of information. Where the data resides will be completely superfluous; all of it will be simply a click away- loan status, default status, imaged documents, discussions of important issues, news, events, etc., and it will be available to servicers, investors, attorneys and vendors alike. Remaining voice and fax transmissions will take place over the internet pipe instead of the current telephone line, with significant cost savings. EDI (electronic data interchange) transactions will occur over this same internet pipe, avoiding costly proprietary VANS (proprietary value added networks). The internet is already a wave so big, that it can easily swallow our industry. And it's getting bigger..
Alan Steven Wolf is an attorney with the boutique mortgage banking law firm of Wolf & Richards located in Newport Beach, California. A founding member of the USFN, Mr. Wolf has served on its Board of Directors and various USFN committees. In addition, he is a past Chair and Co-Chair of the California MBA Legal Services Committee. Questions about this article may be referred to Mr. Wolf at (949) 720-9200 or Alan_Wolf@wolffirm.com.
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The Wolf Firm, A Law Corporation, is an "AV" rated law firm which concentrates on providing superior legal services to the mortgage banking industry. The firm's national clientele includes many of the largest mortgage bankers in the country, as well as a variety of savings banks, commercial banks, commercial finance companies, credit unions, and the Resolution Trust Corporation. With a staff of approximately forty individuals, including attorneys, certified paralegals, legal secretaries, administrators, clerical personnel, and a full time computer systems analyst, the firm represents its clients on a wide range of matters including all aspects of both residential and commercial/multifamily mortgage loan origination and servicing, securitization, regulatory compliance, bankruptcy, and litigation related to the foregoing in both federal and state courts throughout California. For more routine matters, such as residential bankruptcies, evictions and receiverships, The Wolf Firm has developed extremely cost-effective and efficient programs using specially trained paralegals and computer technology to assist its attorneys in handling these matters at rates that are the most competitive in the State of California and, through its membership in the USFN, the Firm is able to arrange similar services in virtually every state in the nation.
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