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High-tech servicing.


Lomas services a huge portfolio by anyone's standard. What makes it work is techno-power and training.

On a warm spring afternoon at a company site called the "campus" just outside downtown Dallas, 68 Lomas customer service representatives have already answered 2,400 phone calls since the workday began.

One might imagine phones ringing, angry voices, people running frantically around looking for answers, and tired, frustrated looks from people who have been on the "horn" all day long.

Not so at Lomas Mortgage USA headquartered in Dallas. Lomas is one of the country's largest servicers of home loans--servicing a total of 624,000 loans and acting as master servicer on another 105,000 loans.

A 4:15 p.m. visit to the company's national customer service department is a surprisingly pleasant experience. Here, people and technology work to produce a somewhat unique commodity--timely, accurate and friendly customer assistance.

Occupying an entire floor, national customer service (NCS) is a vital component of Lomas Mortgage USA's loan administration division. Spacious and airy, the unit is surrounded by walls of windows on the third floor of Lomas' loan servicing center. Blue ribbons awarded to employees for outstanding customer service and team spirit posters are displayed throughout the room.

The work area is predominated by low wall cubicles, each a private problem-solving alcove where NCS representatives work using small telephone headsets. Although each has already talked to 70 customers and the day isn't over yet, the representatives exude a calm and collected demeanor. All are highly-trained professionals who can completely answer customer inquiries for 80 percent of the calls they get in any given day. Less than 20 percent require further research and receive a follow-up call or letter within 72 hours.

Terminals display the exact number of calls each representative has handled that day. These displays carry such information as average call duration and the time the representatives logged on and off the network.

Two large, overhead electronic boards provide immediate, visual feedback, as they continually update the number of calls and the length of time callers have been holding. The numbers are consistent from day to day. Ninety-five percent of the calls are answered within two minutes.

Burnout does not plague this department. Those needing a break often split their phone time by working in the research unit, an area devoted to finding the answers to customer inquiries that require a return call or letter. The result is an extremely efficient operation. Between 2,000-3,000 customers call the toll-free number daily. While the volume of calls is substantial, less than 1 percent require a second follow-up call. Eighty percent are requests from homeowners for information or an explanation about their escrow accounts, property taxes, insurance premiums or late charges. About 18 to 19 percent of the calls are requests for printed documents such as a payoff statement assumption or copies of ledgers.

Approximately 700 calls each day are handled by a computer system that interacts with customers to provide automated "routine" information. The system allows "live" customer service time for in-depth information and/or problem-solving, directing about 1,500 callers to trained NCS phone representatives. The representatives refer approximately 300 of these callers to the research unit, which also handles in excess of 700 pieces of correspondence daily. Of this general correspondence, 85 percent is handled within 5 days of receipt, with the remainder soon after that.

The telephone unit is often the borrowers's first direct contact with Lomas. That contact determines how the company is perceived. Speed and accuracy Lomas believes, isn't enough. The manner in which the Lomas staff project information is as important as the answers they provide. Lomas has infused this philosophy in all eight of the departments within the loan administration division, resulting in what the company describes as "a well-oiled machine."

Moving into a new age

Lomas Financial Corporation, the parent of Lomas Mortgage USA was a company exclusively dedicated to the business of mortgage banking. Moving into the new age of mortgage banking, Lomas divested its mortgage origination operations to concentrate on mortgage servicing.

Today, Lomas has a $24.5 billion servicing portfolio consisting of more than 615,000 loans owned beneficially by 1,000 institutional investors. Lomas is the largest servicer for the Government National Mortgage Association (GNMA) with more than 17,000 mortgage-backed securities holders on approximately 225,000 loans.

Increasingly, smaller mortgage lenders have found it profitable to originate loans and sell them to larger servicing shops that utilize economies of scale to service high volumes of loans. These large-scale mortgage bankers concentrate on tightening management controls, specialized automation and advanced information systems to increase the servicing efficiency.

In 1982, the top 100 mortgage servicers serviced 21 percent of the total residential mortgage debt. By 1988, that number had risen to 28 percent. The top 25 mortgage servicers' share rose from 11 percent in 1982 to 18 percent in 1988. Today, that figure is 21 percent and is estimated to reach 40 percent by 1992.

While direct mortgage servicing remains the company's primary vehicle for future growth, master servicing and subservicing are two lines of business that Lomas believes will position the company as a leader.

A master servicer monitors loan performance, supervises foreclosures and consolidates information on behalf of a security or bond issuer. Subservicing entails servicing loans in the traditional way, while the actual servicing rights are owned by another. The actual owner makes the cash outlay to purchase the servicing rights and reaps the rewards based on high investment returns achieved after paying the subservicer.

Lomas, with its capacity for servicing in excess of 1 million loans, takes on the actual servicing tasks for institutions that have purchased mortgage servicing. Subservicing is attractive to Lomas because the company does not have to lay out the capital necessary to buy added servicing rights. At the same time, the company benefits from an additional source of income.

Lomas is encouraged by the amount of interest in subservicing being expressed by groups or companies wishing to passively invest in this asset. The current glut of available servicing has attracted a variety of non-traditional investors eager to buy servicing with above-average yields. These investors range from insurance companies and pension funds to telephone companies, developers, builders and private placement limited partnerships.

Like the introduction of GNMA and the secondary market evolution that occurred in the early 1970s, this new development in mortgage banking opens doors and affords many non-traditional institutions the opportunity to invest in mortgage servicing.

A newspaper advertising campaign targeting non-traditional investors was initiated by the company in mid-March. More than a dozen interested investors approached Lomas during the first month of the marketing effort.

In such a relationship, non-traditional investors typically have little interest in the direct management of the staff and the "bricks and mortar" required for an effective servicing operation. Moreover, these new investors generally appreciate the ever-increasing importance technology plays in a portfolio's profitability. Because of that, they normally choose to use an automated system which is already being employed by an experienced subservicer, rather than make the substantial capital investments in equipment and system themselves.

Because the market has been flooded with servicing, prices have remained low, and, as a result, the return on this type of investment is quite attractive.

In order not to affect borrowers while setting-up or subservicing their loan, Lomas smoothly integrates the investor's client portfolio into Lomas' existing servicing portfolio. By doing so, the clients' borrowers are assured of receiving the same high level of service and responsiveness now enjoyed by Lomas' borrowers.

The acquisition of a portfolio by a non-traditional investor in servicing can take three months or longer, and it involves several steps. Those steps begin with an investor's education as to what is involved in owning servicing rights, followed by an evaluation of the worth of a desired portfolio, submission of an initial bid, the due diligence process, the submission of a final bid and finally, acceptance of that bid. Lomas often assists the investor in this acquisition process.

Technology: A key component

The foundation of a profitable mortgage servicer is its technical servicing system. As origination costs rise and smaller margins in secondary marketing and increases in delinquency and foreclosure costs impact mortgage shops, automation has become essential to efficiency and profitability.

To ensure that Lomas stays in the forefront of the mortgage servicing industry, the company will bring on line later this year its new Mortgage Loan Servicing (MLS) system. The system is viewed as the next generation of automated mortgage servicing systems.

The IBM-based automated MLS system was developed by Lomas Information Systems (LIS), a subsidiary of Lomas Financial, in conjunction with Lomas Mortgage USA. Countless man-hours went into the development of MLS: 330 Lomas employees and contractors collaborated on the seven-year project.

With MLS, Lomas' and LIS' other clients will operate the industry's most sophisticated loan servicing system--automating nearly all the business functions of servicing mortgage loans and increasing productivity by an estimated 35 percent. Lomas counts a savings of more than $5 million per year in back office operations alone as the company adds loans to its portfolio. Savings will also be achieved with better quality control and detailed "event" tracking. In this way, Lomas' automated tracking system monitors when an event--such as sending a letter--should happen, and automatically initiates the "event."

In addition to improving customer service and management decisions, MLS is expected to reduce operating expenses by increasing the number of loans serviced per employee. Lomas, which currently services 800 loans per employee compared with the industry average of about 600, expects that MLS will enable it to boost that figure to 900 or more without increasing employee workload.

Lomas' ongoing research and development has yielded significant cost containment results in almost every department. In customer service, sophisticated phone systems, electronic boards, computerized answer providers and performance tracking systems have cut costs significantly. In the delinquency control department, other innovations including power dialers and delinquency management systems, in conjunction with the consolidation of the department in 1988, have cut collection costs by 70 percent and boosted collection efficiency by 150 percent.

Laser optics is one example of state-of-the-art technology that has revolutionized data storage. Lomas uses laser optics to increase the volume and availability of stored information and to make that information accessible to the servicing staff. It also reduces the volume of paper documents and virtually eliminates the need to physically retrieve those records. The use of laser optics at Lomas has resulted in an 84 percent productivity boost in the records management area and a 140 percent increase in the payoff group.

Tape-to-tape reporting for investors, guarantors and escrow disbursements has also produced substantial savings. The recent development of tape-to-tape communications to insurance companies for FHA/MI premiums amounts to greater productivity at one-third the cost of manual processing.

One of Lomas' key innovations is a standard field servicing tape for exchange of property inspection information between a mortgage lender and a field servicer. This concept was developed by Lomas Field Services (LFS), the company's nationwide field service operation. The tape is currently used to facilitate 65,000 inspections per month.

Lomas Field Services receives more than 80 percent of all inspection requests through some form of electronic data interchange.

LFS uniquly offers two default-related services in 50 states and Puerto Rico by its field representatives. Roughly half of its business is comprised of physical inspections and valuations of properties in default.

The remaining part of the service consists of a personal interview with the borrowers, which is required by investors and mortgage insurers at various stages of default.

LFS conducts tens of thousands of inspections per month by electronically communicating with servicers via laptop computers used by 98 field representatives. LFS is the only nationwide field services company today using laptops to communicate with its field staff.

The laptops give LFS up-to-minute information about any property needing preservation work. The company can then notify clients within 24 hours of the discovery of vacant property and recommended action. Their laptops are also used at least twice a day to notify LFS' main office in Dallas of emergency situations, and to receive orders for rush inspections or cancellations from a servicer after receipt of a borrower's payment.

The purpose of transferring data by electronic means is not only to communicate the information instantly, but accurately. A side benefit is the reduction of paper flow. For about half of its servicing volume, LFS receives a computer tape or obtains information by "peer-to-peer" telecommunications, an exclusive telephone line between mainframe computers.

When the field personnel communicates their findings with the main office, the inspection information is usually disseminated by computer back to the servicer. LFS inputs the data directly into the customer's online collection system or on-line foreclosure tracking system. Servicer representatives can then pull up their loans as they are servicing them, and their inspection results appear on the screen.

By implementing this highly-automated system, LFS has responded to the varying requirements of government and private mortgage insurers that have made the inspection business a high-volume, complex activity requiring state-of-the-art technology.

In the final analysis, the test for any service-directed business comes from those it serves. The loan administration division meets that challenge every day by striving to provide its customers and investors with outstanding service.

And Lomas is still growing. The company's acquisition of a $3.5 billion mortgage servicing portfolio from Bright Mortgage Company in April increased Lomas Mortgage USA's mortgage servicing portfolio to $24.5 billion from $21 billion and added 94,000 new mortgage accounts.

Strategically, the Bright portfolio acquisition is an important step toward the continued enhancement and growth of Lomas core business--mortgage servicing. Furthermore, it represents a significant leveraging of investments of capital, both human and financial, a comprehensive and technologically advanced mortgage loan servicing system. Lomas is succeeding by being an innovative player that not only responds to, but sets the technological trends in the mortgage banking industry. [Chart Omitted]

Terry J. Deyoe is the executive vice president of Lomas Mortgage USA, Dallas, where he is responsible for the company's loan servicing portfolio of $24.5 billion.
COPYRIGHT 1990 Mortgage Bankers Association of America
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1990 Gale, Cengage Learning. All rights reserved.

Article Details
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Title Annotation:mortgage loans
Author:Deyoe, Terry J.
Publication:Mortgage Banking
Date:Jun 1, 1990
Previous Article:Pretty packages: don't judge the value of a servicing package by surface appearances. All that glitters is not 14-karat.
Next Article:The new environment: a little self-knowledge can go a long way towards preparing lenders for servicing's most recent trends.

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