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Computerized collections.

Mortgage bankers are taking notice of this new technology that curtails expenses and valuable time spent on telephone collections.

Beads of sweat were running from his forehead. His hands were cold and damp. His breath short and choppy. He sat there, as if waiting for the switch to be thrown. Knowing that any second, he was going to get what he deserved for his enormous crime A crime he tried to avoid, but couldn't.

Suddenly, the door swung open and in walked the vice president. "You have a reprieve," he said with a broad smile on his face. "We acquired a predictive dialing system for your department. This tool will help tremendously in contacting our delinquent mortgagors."

This scene will be played out in more than one mortgage company this year as the economy falls and delinquencies rise. In 1992, the collection manager's job will be a very difficult one at best. As the number of delinquencies mount, it becomes increasingly obvious that individually contacting each delinquent mortgagor will no longer get the job done. A more efficient method of making and receiving calls by the staff is required.

Predictive dialers: a tool for today

Make room for predictive dialers. These new "wiz tools" connect your servicing computer system with your telecommunications system for efficient collections management.

Using a predictive dialing system creates many operational efficiencies in outbound dialing. Predictive dialing system not only dial faster and more accurately, they can queue busy and no-answer results for second or third attempts without ever communicating with the counselor. Additionally, most predictive dialers can capture the bad-number information and ship it to a skip-tracing service for updated phone information.

Predictive dialers are not a recent innovation. However, those early products were no match for today's sophisticated systems. And some say collections is only the beginning of the types of applications appropriate for this communications technology.

Unfortunately, the process of "dialing for dollars" has been a grueling experience for every collector since the telephone was invented. As a result, many people burn out quickly in this high-stress job. Yet for many people who remember the "good old days," there were several forms of collection techniques that helped reach delinquent mortgagors by phone.

Gregory A. Samp, president and chief operating officer of Sibley Mortgage Corporation, Rochester, New York, remembers how a form of predictive dialing was accomplished with the local telephone company when he was with Mortgage Associates (now Fleet Mortgage Corporation) in Milwaukee.

Samp recalls, "In the early 1970s, we would print out two lists of 30-day accounts broken down by metropolitan area. One list would be sent to the local telephone company and the other would stay with the collector. Each morning, the collector would call the telephone operator and agree on which delinquents to call during the day."

According to Samp, the rest was easy. "The operator would call collect and put the customer on hold. When you finished with a call, the operator would ring back, pass the on-hold call and then dial the next customer on the list. It wasn't very automated, but it worked well."

Not so many years later, a method of dialing assistance - called a "dialing drone." was used by many mortgage servicers to contact delinquent mortgagors. The process entailed downloading telephone numbers into a personal computer attached to a dialing unit. The PC did some sorting based upon time zones and then instructed the unit to dial the next number.

When the unit detected a human voice, it left a very plain, canned message for the person on the other end of the line. Why such blandness? Because companies were never certain who actually picked up the call. It might turn out to be the borrowers, their children, their neighbor or someone else. Consequently, the only thing the dialing drone could do was to ask the borrower to return the call. The most that could be gained from this process was to generated a great deal of return calls to the company. The idea was that these calls would supply the collections staff with the necessary information to do their jobs.

The major players

There are several vendors selling predictive dialers today. The leaders at this time are Digital, Melita and Davox, all of which offer products with similar features and are competitively priced.

Digital Systems International, Redmond, Washington, was founded in 1983 as the Microperipheral Corporation. It offers 400 system installations at more tha 270 companies. The product is called Voicelink and is a mid-range system running on Hewlitt Packard equipment. This system can connect to a variety of host computers and telephone switches.

Davox Corporation, Bellerica, Massachusetts, was founded in 1981. Davox has more than 700 systems that interface with a number of host types and telephone systems.

Melita International, Norcross, Georgia, has been in business since 1979. It has more than 650 customers using a predictive dialing system that interfaces with several host computers as well as telephone switches. It operates on IBM PS/2 hardware in a DOS, Windows or Presentation Manager environment.

Countrywide's research

Pasadena-based Countrywide Funding Corporation has experienced a tremendous growth in both fundings and servicing-portfolio balances within the last year. The loan fundings have increased from almost $500 million per month to approximately $1.5 billion per month. Meanwhile, the servicing portfolio has grown from $15.1 billion to $27.3 billion. The added volume has put a huge strain on an already-over-burdened collection department.

The current goal of the collection department is to have phone contact with 100 percent of delinquent borrowers. There are only two methods of accomplishing this goal: either employ additional staff to meet the demands of an ever-increasing portfolio or use a predictive dialing system.

Countrywide determined that the first alternative was not practical, because only 33 percent of all collection calls find the right party. The remaining 67 percent of calls are nonproductive and often result in a no-answer, busy or wrong number. Consequently, about six months ago, Countrywide began to investigate installing predictive dialers in its collection department. The company selected the three primary vendors in the marketplace and sent them a detailed survey. The survey contained questions on the following topics: * technical specifications/performance

issues; * reporting; * installation/equipment; * software; * training; * pricing/contract terms.

Each of the major headings had a number of direct questions to which the vendor was asked to reply. Some were simply a "yes" or "no" answer, but most required a narrative response. Under the "technical specification" section, there were a total of 26 questions. Some examples are: * What is the counselor wait-time between

calls? How can this be closely

monitored? * How many lines can be linked to

each station? * Does the system allow employees to

modify the pecking-order of calls? If

so, is it prior to calling or during the

calling? * Does the system offer skip-tracing


In total, approximately 80 questions were posed. From those responses, Coutrywide prepared a comparative matrix that evaluated each vendor's product within the specific sections. After a careful analysis, the choices were narrowed down to two vendors.

After several on-site demonstrations and off-site visits to current users of the two vendors, a cost/benefit analysis was prepared on each product. Although each offered similar features, there was a fair amount of difference between the two in monthly and annual costs.

Selecting a system

The recommendation reached by the group was to select Melita as the vendor of choice. Melita's product was installed in late November 1991, and was ready for a shakedown cruise. In December, Countrywide began to use the system for the 30-day delinquent contacts.

Candy Broussard, who was Countrywide's systems analyst on the project said, "Integrating the Melita system with our AS/400 and Northern Telecom switch took eight weeks from decision to dialing. Our loan counselors have been using the system for almost two months now and the number of customer contacts have already increased 40 percent."

Although the overall increase in contacts is up 40 percent, the actual "hit rate" of calls while using the predictive dialer is up a whopping 300 percent, from 10 calls per hour to 30 calls per hour.

Early results show the system is providing the hoped-for gains in productivity. As Countrywide continues to fine-tune the system, those gains should increase.

Mortgage companies' views

Today, many mortgage companies are finding the use of predictive dialers invaluable. The following is a sampling of what some companies had to say about the application.

Tom Price, collection manager of Chase Home Mortgage Corporation based in Tampa, Florida, indicated his company switched to a Digital system last August after using an AT&T system for two years. The change came after AT&T announced plans to leave the predictive dialing market. "We chose Digital because some of the other Chase entities had Voicelink Systems in place and it appeared to have the most powerful reporting capabilities," said Price.

Chase uses the Computer Power, Inc. (CPI) system for its collection operation and, like Countrywide, downloads 30- and 60-day accounts into the dialer. It has used the dialer for 90- and 120-day accounts, but to accommodate these, Chase had to alter the dialing parameters because these calls required more time to review the account activity and speak to the borrower.

Price said that the use of a predictive dialer has "increased productivity more than 100 percent and has contributed to Chase's low delinquency ratio."

San Diego-based Guild Mortgage Company services approximately 25,000 loans, and has found that investors are pushing for servicers to contact delinquent borrowers earlier. Consequently, the company invested in a predictive dialer to stay competitive.

Renee Rojas, collections manager at Guild, said the impact of the dialer on its ratios has been better than expected. "Our ratios for December 1991 were lower than the previous four months of December."

At Stockton, California-based American Savings Bank, Sharon Alfonso recounted similar experiences. Alfonso, vice president of collections, indicated the mortgage collections department at American Savings installed a five-station predictive dialer system last May in an effort to increase phone contact without adding staff. The company selected Melita because they liked the inbound/outbound call handling and the special pacing control at the collector level that only Melita offers. According to Alfonso, the dialer has allowed the company to increase its delinquency contacts significantly.

American Residential Mortgage Corporation, La Jolla, California, installed a predictive dialer in 1988 when management discovered the company wasn't making sufficient contact with its delinquent borrowers on a regular basis.

C.B. Carnegie, assistant vice president at American Residential, explained that the firm is currently servicing 115,000 loans. Carnegie stated that, "The [dialer] has allowed [us] to double productivity because it filters out the |busys,' |no answers' and the wrong phone numbers. The system also provides reports that help to manage the collector's efforts. I'm an advocate."

Other applications

From mortgage banker's standpoint, the primary use for predictive dialers is in the collection department. However, in this wild period of refinances, this tool could be used to handle call backs that seem to mount up during the day. Such systems could also activate cold-calls to prospective refis within a given portfolio range of interest rates. The marketing advantage her would be to offer the home-owner a refinance before he or she decides to shop around with another lender.

Predictive dialers can be used for any type of solicitation. Related insurance coverages, automated clearing-house payment processing or general customer-service follow-up all are good uses for predictive dialers.

As portrayed in the opening example, mortgage bankers will be focusing on collection efforts for the foresee-able future. The question that most companies must answer is how to best deal with the ever-growing delinquency problem.

Because the current method of calling is labor-intensive and often inaccurate, the cost for this service will continue to rise as the portfolio and delinquency ratios grow. It is an unmistakable fact that unless some form of automation is introduced into this manual process, many companies will find it difficult to bear the cost of the added overhead.

Although predictive dialers are not inexpensive, the return on investment can be quantified by several cost reductions. The systems are designed to: * curtail the need for additional staff; * provide maximum control over dialing

pace; * improve collectors' organizational

skills and performance; * reduce delinquency ratios; * increase applications beyond the


Without a doubt, there will be vendors introducing similar or improved products within the near future. These products will provide greater call-processing capabilities and will feature enhanced systems-interface functions.

As competition increases, costs will come down and required feature/functionalities will become standard. The interfaces between inbound and outbound call traffic, the automatic call distribution (ACD) groups and the host computer systems will be smooth and seamless. Additionally, all vendors will embrace an open architecture to eliminate the need for proprietary hardware and software.

The next generation of predictive dialers will be joined with artificial intelligence and voice recognition/response systems, making the possibilities for future applications endless. Corporate executives who choose not to deploy this productivity-enhancing tool may soon find themselves on the same hot seat that the poor collection manager now finds himself.

Jeffrey Butler is managing director and chief information officer of Countrywide Funding Corporation, Pasadena.
COPYRIGHT 1992 Mortgage Bankers Association of America
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1992 Gale, Cengage Learning. All rights reserved.

Article Details
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Title Annotation:mortgage banking collections
Author:Butler, Jeffrey
Publication:Mortgage Banking
Article Type:Cover Story
Date:Mar 1, 1992
Previous Article:Cutting edge solutions.
Next Article:The best of both worlds.

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