5 Key Predictions & Takeaways For Mortgage Servicers in 2023

This commentary was originally published in the March 2023 edition of DS News Magazine. To view the full issue, click here.

Fannie Mae origination volume estimates call for $1.69T in 2023, including $1.32T purchases. This is down 28% from $2.36T in 2022, which included $1.66T purchases. So while the Fed’s rate hikes to fight inflation are necessary, it’s hitting lenders, homebuyers, and housing hard. But servicing keeps growing, with MBA estimating outstanding loans at $13.72T by December. So, mortgage servicers in 2023 can win if you’re strong on capital, cost control, compliance, customer acquisition/retention, and, of course, fintech.

Servicing fintech, when done right, checks all these boxes to keep homeowners happy in their homes while executing at scale with no mistakes in our highly regulated ecosystem.

With this market context, let’s look at some servicer playbooks, and then run down five key predictions and takeaways for servicers in 2023.

How to Achieve Scalable, Compliant Innovation in Any Market

Entrenched legacy systems stand in the way of accessing data. And data access – as well as data protection requirements – will only grow in importance as federal and state regulations proliferate and evolve.

Servicing fintech solutions must allow homeowners to access their data securely from any device to manage their home-owning lives. This includes making payments, analyzing and adjusting tax and insurance escrow accounts in real-time, requesting help for (and resolving) hardships, and viewing and taking action on home value and available home equity.

In our landmark partnership with Mr. Cooper, America’s number three-ranked mortgage servicer, Sagent acquired Mr. Cooper’s core servicing fintech platforms along with 200 fintech employees that are now integrated with Sagent building cloud-native solutions to power America’s $13T+ servicing sector.

Sagent’s open-API platform makes thousands of consumer-owned data points available for you to configure workflows tailored to your customer service, team process, and investor reporting needs, supporting mortgage servicers in 2023 (and beyond).

Today, the platform serves 4 million of Mr. Cooper’s customers, melding Mr. Cooper’s servicing DNA with Sagent’s robust tech stack to empower servicing operations teams with real-time data so they can see previous customer engagements, loan info — every salient detail about a customer — all in one place.

The result is an efficient core servicing operation that powers lifetime homeowner relationships – through good times and bad – while serving investors and exceeding regulatory expectations.

Real-Time Innovation for Real-Time Compliance

The benefits of a cloud-native approach are speed, security, a better experience for constituents, real-time processing, and compliance across all activities — all at scale, and always aligned with real-time policymaking.

Here’s an example of how that works in action:

When the CARES Act went into effect to provide mortgage payment relief as the pandemic spiked in 2020, servicers (powered by Sagent) were ready with push-button forbearances on day 1 of the CARES relief effective date.

Sagent’s default platform handles the full non-performing lifecycle, enabling homeowners and servicers to work together from hardship request to resolution, and servicers can configure all customer service and compliance workflows to fit their processes.

Yes, delinquencies are low today, and pandemic homeowner hardships have waned. But servicer technology must be ready today for tomorrow’s cycles. 

At Sagent, we’re investing in tomorrow to keep servicer cost and compliance tight while keeping homeowners happy and in their homes.

A Top-Notch Homeowner Experience Drives Retention and Profitability

MBA’s recent Performance Report showed a cost of $11,016 to originate a loan in 3Q22, and while that number is expected to come down as originators remove capacity from the system, these customer acquisition costs have many lenders doubling down on servicing to compensate.

But too many of the tech tools that servicers use today are deeply siloed, creating additional customer experience hiccups in an industry already struggling to meet consumer expectations.

Retention has never been more important, and servicers must be able to deliver a bank-on-your-phone experience to homeowners in their own brand — and also be able to have their customer service teams help in real-time, at any moment, using multiple communications channels (desktop, phone, SMS, etc.), and see the same data their customer is seeing.

Sagent’s consumer platform streamlines 1+ million homeowner interactions with 49,000+ new recurring payments created each month. Each year, the platform facilitates $14+ billion of one-time payments. And, we’re meeting borrowers where they are — 45% of these interactions happen on a mobile device.

All of these servicer and homeowner experiences – and data sharing – must work across the full performing and default lifecycle of every loan, seamlessly cover every compliance and investor detail, and enable real-time processing and reporting of all compliance and investor requirements. 

If your fintech platform doesn’t do this, yet, 2023 is the year to tighten it up.

Predictions & Takeaways for Mortgage Servicers in 2023

In 2023, it’s all about capital, cost control, compliance, and customer acquisition/retention, and here are four predictions and one primary takeaway. 

This year, I predict:  

• We’ll continue to see servicers with strong balance sheets acquire more MSRs.
  
• We’ll see originator/servicers with strong balance sheets try to hold the line on MSRs rather than sell to fund origination operations. There’s still more storm to weather as inflation remains stubborn.
  
• Our industry has improved materially since the post-2008 years, and we’ll continue to see servicers set a new bar for compliance, which will prove itself even more in the next hardship cycle.
  
• When rates drop in response to moderating inflation, retention will rise for the best servicers. And the best servicers know that great retention IS customer acquisition because each retained customer is a new origination.  

The primary takeaway is that the best servicers use smart fintech strategies to master cost control, compliance, and customer acquisition/retention. 

A smart fintech strategy must include enterprise, default, and consumer platforms that are all synced by real-time data. And you must run a cloud-native, open-API model to take real-time action without missing any fine details on customer service, operations, and compliance.

This is the new status quo, and this is what Sagent stands for. Please reach out and let me know your thoughts on my predictions or your tech stack strategy. 

This commentary was originally published in the March 2023 edition of DS News Magazine. To view the full issue, click here.