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Servicing smarter.


Advanced technology is bringing many new capabilities to the loan administration departments of mortgage bankers. One of the largest changes experienced by those who are putting technology to work for them is the way in which business is done. Staff allocation, work prioritization and cross training is resulting in fewer customer contacts, better cost controls and higher loans serviced per employee.

Also, managers are finding they have more time to supervise and finely hone operations from their desks. By allowing computers to parcel out tasks, prompt users in these tasks and perform many functions independent of operators, high-tech servicers have been able to cut costs and increase productivity.

This article is a presentation of six of the newest applications of technology that redistribute the servicing workload intelligently. Most mortgage banking firms are currently considering or have already integrated some of these features. The important thing is that each new system should supplement the workload of the employees. In this way, servicers can streamline operations by having computers do repetitive tasks, and having employees branch out with a wider range of duties. These six applications are: * sensible optical imaging; * work queues; * computer-assisted collections; * information robotics; * intelligent systems; * systems integration.

All the techniques discussed have come into existence by analyzing current procedures and figuring out how computers can help optimize them. By studying actual operations, servicers can gain far more than simply lowered costs - reduction in error rates and enhanced customer service are powerful results. The snowball effect is that a greater portion of clients (borrowers, investors, etc.) are satisfied, while at the same time, the staff handles an increasing number of loans.

Sensible optical imaging

When optical imaging devices first came on the market, many had a myopic vision of their function. They were proposed as electronic filing cabinets - capable of storing reams of paper on a disk the size of a record. Because mortgage banking companies still require an actual paper trail for many transactions, some believed that the sensible optical imaging system was not suited for the industry. In the beginning, these systems weren't capable of organizing data as well as filing it, so there was little promise held for their application in mortgage banking.

Today, sensible optical imaging combines bulk storage capabilities of imaging technology with programmed logic to help servicing employees make sense of the vast amount of information at their fingertips. Once scanned, a document can be displayed on a terminal side-by-side with data about a loan file. This allows an employee to work with the image in a sensible, organized fashion. Even newer programs now allow parts of the scan to be enlarged so that the most important data "jumps out" at the operator behind the terminal. Clerical employees can further be guided through complicated tasks by first displaying the scanned document and then prompting the clerk to perform the necessary record entry.

These systems are particularly efficient for mortgage bankers because of their ability to index, sort and characterize documents and fields of manually entered data. By treating an optical image in the same way as a note or a signature card, many users in a company can draw on the same document for reference. This makes all employees more productive. When a company gets to the point where it is scanning and coding all of its incoming mail and documents, the system gains efficiency by allowing staff to obtain partial files without the risk of losing the original. Also, better time management of activities is achieved with the scanned files.

ARCS Mortgage, Inc., Calabasas, California, is one of the mortgage industry's leaders in optical imaging technology. George Lowery, vice president, directed the development of the new technology, keeping in mind the loan administration department's need to function together as a whole. According to Lowery, "We worked directly with the staff who would deal with the images, and studied how they would utilize information from scanned insurance bills and notices. Once we understood the current workflow, we were able to streamline the process by eliminating the paper. The screens that govern the input of data from an invoice were developed in direct relation to efficient escrow administration." Lowery also pointed out that the escrow staff at ARCS, "would be unwilling to give up the system now, at any price. They understand the contribution to both corporate and personal effectiveness that the system promotes, and are proud of their ability to exceed industry standards."

Work queues

In general, computers have the capability of determining which accounts need attention. They do this by recording loan numbers where certain "flags" - like a late payment, or a bill, have been logged in the system. Management must first program the computer to prioritize and assign these tasks, with the goal of creating personnel efficiency on all levels. The computer can also be programmed to automatically refer some flags, or exceptions, to higher levels of supervision. This frees up managers to do more planning, supervision and training. By assigning tasks only to employees that are capable of performing them, servicers can reduce error rates and duplication in customer contact.

Imagine this scenario. A servicing employee arrives for work at 8:00 a.m., and signs on the computer. This activates an automatic time-card entry; marking the employee as present. The computer then analyzes the employee's work record to see what functions have been authorized by his or her manager. The computer knows what tasks need to be completed that day and assigns what needs to be done by the employee - displaying the jobs one by one on the screen. The computer system manages the employee's time throughout the day, even plotting breaks and lunch periods. Finally, when the computer performs its nightly MIS tasks, reports are generated analyzing both the volume and the quality of the employee's work for supervisory review.

Sound like the year 2010? Maybe to some, but this technology is actually being utilized today. The key is having a computer system that prompts employees to do a variety of things so that excessive cross training is not necessary. While no one can expect a junior collections representative to completely understand escrow administration, no one would doubt that person's ability to post hazard bills to the system, if properly guided. The loan administration's training department teaches an overall understanding of each servicing function - the computer does the rest.

Computer-assisted collections

Holding down delinquencies is a major thrust for mortgage bankers. Two new advances that assist the collections staff are default forecasting systems and telecommunications equipment and software. Working jointly or independently, both products have the goal of slashing the volume of delinquent accounts and reducing the length of time without a payment or customer contact.

Default forecasting systems work like diligent clerks, looking for patterns in a mortgage banker's portfolio. For instance, a customer whose payment is usually posted by the second day of the month may make a payment on the 17th. In most firms, this would cause late-charge billing, but would not trigger a customer contact. To the dedicated system, it may indicate many things, such as a change of job, change in occupancy or perhaps shock due to a payment adjustment. In any case, a default forecasting system would prepare a list of customers to be contacted by servicing employees. The theory behind this system is that if it is worthwhile to call your worst customers, it is certainly sensible to call your best ones too. The computer can be programmed to follow any trend that management may be interested in. By taking an interest in these loans at an early stage and identifying those with a higher risk of default, servicers provide a higher degree of assurance of product quality to both investors and borrowers.

Recent technology allows an idle PC to make phone calls to a large list of numbers. As soon as a payment is past its due date, the computer message asks the borrower to call the servicer; giving the borrower yet another reason to keep in contact. During the course of the computer message, the PC doesn't exactly have a conversation with the borrower - it merely states that there is an inquiry on their account and tells the borrower how to contact a customer service representative. The special modem boards and software that make these calls dial four to eight calls at a time, giving servicers the golden opportunity to open up lines of communications with many borrowers at even the earliest stages of delinquency.

Information robotics

While some calls to the customer service department require attention from a skilled, veteran professional, many, however, do not. Standard, specific inquiries about the loan, such as whether a payment has been received, or the approximate payoff amount, can be delivered without the use of staff resources. Information systems, which can deliver specific information about a loan just by the caller punching in the account number, offer an efficient way to cut down on this customer contact staff time, without reducing the level of service provided. Also, borrowers can call one of these user-accessible computers 24 hours a day, which takes the burden off peak calling periods and reduces WATS line charges.

Other types of information robotics allow mortgage bankers to provide general information about loans, such as tape-recorded explanations of ARM adjustments, escrow account analysis and how to get payoff information. This type of workflow has two advantages. First, it may completely handle the borrower's inquiry. Second, it may help borrowers to have their questions more clearly defined when they eventually talk to a service agent. This in turn reduces the amount of time a customer service representative spends handling a borrower's inquiry.

Most of these systems allow callers to leave a message that can be delivered to the appropriate department if their questions cannot be fully answered by the computer message. This allows the loan administration department to better manage its calling efforts. Along with work flow assignment systems, the computer can assign the borrower's message to persons who are capable of handling the question, regardless of what department they are in.

Dallas-based Lomas Mortgage USA has used these types of communications technology for several years. Karen Smith, systems administrator, describes Lomas' experience with information robotics as, "extremely successful." "Twenty-five to thirty percent of calls made to Lomas' toll-free lines are completed by the system (commonly called "infobot" systems) without human contact, though the customer can enter the queue for a human contact whenever they wish to."

According to Smith, Lomas has even utilized an infobot-type system to ease the burden of servicing transfers. Smith said, "When the customer calls in about a loan for which we have not yet processed the file, they hear a tape recording telling them exactly what day they can call in to have their question answered, and what address to mail their payment to in the meantime." The new Lomas customer can speak with a customer service representative right away if necessary, but most will wait until the date indicated in the recording, according to Smith. As for customer satisfaction with the system, Smith points to Lomas' 25 percent completion rate, (the percentage of time the system answers the customer's inquiry) and adds that, "an infobot is trained to react to an inquiry just like an actual customer service representative, and this ensures the best possible customer service."

Intelligent systems

A good definition of an intelligent system is one that knows the rules, knows if everyone is following the rules and one that maintains its purpose even if it encounters exceptions to the rules. A foreclosure and claims processing system is a valuable tracking device for a loan administration department. When that system is programmed to be intelligent, it begins to know limitations, processes and requirements for specific loan types, specific investors and specific states. It further learns when it can parcel out different sections of the task to employees, and makes sure they accomplish their work properly; not deviating from the norm. Finally, this system reaches its highest level of intelligence when management programs it to allow exceptions to certain steps in the process. When this occurs, the machine "heals" the error of these broken rules by following new logic guidelines set by the authorizing manager.

Thomas Apel, president of Phoenix-based Adfitech Systems, has utilized intelligent systems for years, and speaks about their usefulness: "These systems can be particularly useful in multi-loan, multi-state scenarios. The system can recall many more rules than humans. The user follows profiles of rules to go step by step through the process." Apel cautions though, that "you must watch out not to try and replace intuitive human knowledge; humans must be able to override the system. Last year Adfitech used profiles to deliver detailed information in their contract quality control operation and resulted in a 50 percent savings in staff time for common operations.

Systems such as these can be applied to all areas of mortgage banking. They do more than just guide employees to do their job in accordance with corporate policy. These machines can deal with a wide variety of situations presented by borrowers who call in. It has reporting functions for all exceptions processed. It can also quickly reassign a task in the event of an employee's termination, illness or the person's occupation with another group of tasks.

Computers cannot make value judgements for mortgage bankers. No one would want them to. They are, however, capable of illustrating the consequences of all actions permitted by the company's guidelines. A staff member with the authority to make decisions can then use this information to successfully manage the servicing operation.

This process becomes clear in the area of escrow administration. After an account is analyzed, a computer cannot make every judgment correctly about how to reassess the customer's payment. If borrowers call in, mortgage companies attempt to accommodate them using all the means permitted by the investor. To achieve this goal, the computer system can present all reasonable and allowed alternatives to the customers service representative, check the borrower's past payment history and then illustrate the different options for explanations purposes.

When the computers know the rules, they help everyone to follow them. Exceptions will always occur, but they can be better defined and resolved within parameters set by the system.

Total systems integration

When a top-level manager can sit in his or her office and put a finger on the pulse of the organization, management information is at its highest level. This happens by tying together the many different means by which data is stored at the company. Afterwards, sensible programming routines are designed to present these ideas clearly to top-level management. This involves the programmer paying attention to the level of detail and the manner in which the information is presented.

Timeliness is important. The secondary marketing department of mortgage banking firms must always know the status of the uncommitted pipeline. This encourages certain types of communication. Today, all departments need to share information. Data that tracks the efficiency of the loan administration department should be directly available to inquiring executives. Their computers become objective interpreters of effort and results. The time spent on-hold, collection success, claims overpayment and many other areas can be tracked and presented instantly.

Jeffrey Butler, chief technology officer for Pasadena-based Countrywide Funding Corporation, has led the corporation through a complete integration of production data into the executive information system (EIS), and is now spearheading the addition of loan administration data to the overall system. According to Butler, "Meetings need to take place to determine more than just what information is to be presented."

"Meetings are held at Countrywide to determine how the information will be presented." By understanding the needs of end-users, the right amount of sophistication can be integrated to the charts and graphs that will be used. According to Butler, "Delinquency data, sorted by state, loan type and source, as well as summary portfolio information, will be the primary loan administration measurements brought on-line through [Countrywide's] EIS.

Systems integration can also allow servicing managers to know what is going on in other areas of their organization. Workloads can be anticipated and adjusted if swells in the new origination volume are coming. Servicing managers can also keep abreast of trends in financial markets that may bring in larger volumes of conversions or bankruptcies.

The ability to react to a quickly changing environment, and continue to deliver a high level of customer services, characterizes today's mortgage banking industry. The tools discussed in this article allow loan administrators to stay on top of their operations, without incurring a lot of additional personnel expense - by best utilizing those employees who are already there. Technological advances such as these also establish that the control of the servicing environment is firmly in the hands of servicing managers who are watching it all - on the screens of their computers.

Brian Hershkowitz is an associate director of government agency relations for the Mortgage Bankers Association of America, Washington, D.C.
COPYRIGHT 1991 Mortgage Bankers Association of America
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1991 Gale, Cengage Learning. All rights reserved.

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Title Annotation:Technology
Author:Hershkowitz, Brian
Publication:Mortgage Banking
Date:Feb 1, 1991
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