Servicers brace for a seismic change.
Posted on July 27th 2009
Mortgage servicing is about to undergo a seismic shift in the next few years as the regulator starts to focus its attention on how borrowers in difficulty are dealt with. There is a likely parallel with the provision of sales advice whereby the regulated entity must show that they know their Customer before giving any kind of sales advice. This sounds pretty obvious but for those of us who have been in the regulated markets for 15+ years we still remember the days when a fact find was at best an A4 sheet of paper with little more than a name and address.
Things have moved on for the better with Principle such as TCF making a major contribution to consumer protection. One of the big issues in mortgage servicing is that many companies operate what can only be described as a one size fits all policy. If a borrower goes into arrears they send out a letter, if they stay in arrears they send another letter, if that fails they start phone calls to try and find out what the problem is. In itself it is not a disastrous approach as long as the Country is not in the worst financial mess since the Great Depression.
Nowadays there is a real need to know your borrower before you start administering their mortgage and if the borrower does find themselves in financial difficulty it is critical that the servicer has all the facts to hand. Only then will all the options be explored and borrowers treated fairly.
