Author:
Nexval Infotech
As servicing costs continue their upward trend, businesses need to adopt mortgage process automation services from experienced vendors such as Nexval to offset the impact on their bottom line.
This has never been as important as it is in 2024. In the last four years, the cost-to-service ($ per loan) has increased by over 9%. Servicing expenses for distressed loans are particularly high, going from $1,226 in 2020 to $1,994 in 2022. On top of that, the mortgage servicing rights (MSR) market is going strong, adding to servicers’ operational burdens.
By taking proactive steps to drive servicing efficiency, especially for first-time buyers and delinquent loans, mortgage companies can maintain their productivity and increase the value generated from each customer relationship. Efficient servicing processes are also easier to adapt to different regulatory regimes and staff constraints in bearish periods.
To achieve this, Nexval offers a wide range of mortgage process automation services and digital solutions:
1. Integrated mortgage process automation services and ecosystem
One of the key reasons for servicing inefficiency and rising costs is the siloed nature of data and operations. When information resides in disconnected systems and workflows run independently of each other, it results in duplications, redundancies, and errors. This is mainly because mortgage companies rely on a sizable legacy stack and, at the same time, want to benefit from new-age infrastructures like the cloud.
That is why mortgage transformation partners like Nexval help create an integrated ecosystem where disparate components can exchange data through application programming interfaces (APIs). This allows events and actions to act as triggers for mortgage process automation and servicers can benefit from a single pane of glass when it comes to mortgage data access.
Read more: ChatGPT and the Future of Mortgage Servicing: A Look into Intelligent Chatbots
2. Maintaining documentation hygiene for mortgage servicing rights
MSRs can provide an additional source of revenue to lenders and offset some of the natural production costs associated with a typical mortgage. Unfortunately, MSR transfers are riddled with inefficiencies of their own, including difficulties in capturing fair value, tax accounting, collecting and updating documentation, etc. With mortgage companies still relying on manual documentation processes, accruing sufficient value from mortgage servicing rights can be challenging.
To address this, Nexval offers advanced document management solutions powered by the same technology that informs our mortgage process automation services. It uses AI techniques like optical character recognition to reconcile different data formats, both structured and unstructured. It provides a centralized repository for audits, accounting, and reporting requirements related to mortgage servicing rights so that companies can maximize their revenues from MSR transfers.
3. Business intelligence systems for better decision-making
Actionable business intelligence allows servicers to make smarter, more cost-efficient decisions – however, this can be difficult in the absence of an integrated data stack, such as a data fabric. Servicers should be able to fetch, ingest, process, and analyze information from origination systems, risk mitigation portals, CRMs, modeling tools, and more to preempt and prevent revenue leakage. BI can also act as the foundation for mortgage process automation services by executing actions based on data triggers.
At Nexval, we offer intelligent data extraction tools with multi-screening information validation to enrich servicing business intelligence and converge disparate data sources for proactive analysis. Servicers can benchmark performance, capture leads, identify servicing risks, and improve their portfolio performance through data-driven decision-making.
Read more: How Servicers Can Modernize Communications with Default Borrowers
4. Digitally enabled best-cost support solutions
Several bullish and bearish periods have followed the 2008 recession, making it difficult for servicers to maintain an optimal headcount. Today, systems (18%) and customer service (17%) are the two most significant contributors to servicing costs, and optimizing headcount through either mortgage process automation services or outsourcing to best-cost locations can provide some relief. In this context, selecting the right outsourcing partner can also make a difference to the bottom line.
Nexval offers end-to-end support across the servicing value chain, covering core servicing, loss mitigation, default operations, REO support, records management, and servicing QC and audits. By paying special attention to non-performing loans, it is possible to reduce one of the key contributors to servicing costs today. As interest rates remain high, outsourcing will be an important alternative for servicers looking to manage distressed loans efficiently.
Read more: Reshaping Mortgage Servicing: Embracing a ‘People First’ Digital Framework
Towards a Digitally Powered Servicing Function That Prioritizes Cost Reduction
Despite overall economic growth, the housing market and the mortgage servicing industry has come under various kinds of cost pressures in the last few years. This has taken a toll on productivity – for example, the average number of loans serviced per employee shrunk from 900 to 723 between 2019 and 2021. As employees try to engage customers and prevent delinquencies in a challenging market, servicers are feeling the pinch.
Given that corporate and admin costs make up nearly 20% of servicing expenses, mortgage process automation services can play a major role in avoiding non-value-adding, non-production expenses. Additionally, Nexval’s offerings for documentation management, data extraction, risk and compliance can also amplify the value obtained from mortgage servicing rights. Ultimately, this relies on a strong digital bedrock comprising cloud infrastructure, access to technical skills, and next-gen data systems.
Speak with Nexval’s mortgage servicing experts to know more.