Standardized Data + Process is the Road to MSR Transfer Success
At MBA Servicing 2023, a panel of experts — including Sagent’s own SVP of Product Management, Derek Meadows — shared insights on the work they’re doing to improve data and delivery standards relating to MSR transfers. Their goal is to provide a set of standard documentation and protocols for use in each transfer, resulting in a better experience for servicers, homeowners, investors, and vendors.
First, here are the panelists:
- Adam Elaroussi, FHFA
- Derek Meadows, Sagent
- Joey Prince, NewRez/Shellpoint Mortgage
- Rachael Macaulay, Flagstar
- Moderated by Matt Seu, Actualize Consulting
This group shared their experience as members of the MISMO Servicing Transfer Development Workgroup, and here are 4 takeaways — including one audience perspective — we want to share.
Good tech needs solid processes
A big reason fintech innovation has been challenged in servicing is the immense regulatory complexity and lack of data standardization across the industry.
As the panelists explained, the first task for the MISMO Servicing Transfer Development Workgroup to tackle was identifying between 2500 – 3000 data points. From there, the work had only just begun since there was no true standard method or process to inform how the dataset would be used.
To remedy this, they’d first need to define an operational standard to serve as a reference point for documentation, servicer-to-servicer engagement, and testing timelines needed to ensure the timely delivery and reconciliation of transferred information. So, with their project now in phase 3 (more detail here in the deck from the panel) they’re working with servicing-industry leaders to make it a reality.
Sagent has similarly recognized that true innovation in servicing must go hand in hand with close scrutiny and transformation in servicing operations… and that it must be informed by the people who are in the trenches. It’s why you hear so much from Sagent about “Visionaries who get the details.”
Compliance, cost, customer experience
According to the group, the CFPB, OCC, and other regulators are looking at the transfer process and asking, “Are you doing everything you can to make this as smooth as possible for the consumer?” Derek pointed out that when executing a transfer of, say, 20,000 loans or more, you’re not going to be able to look at every document for each loan to make sure the data is accurate.
But document issues do exist, so Derek asked
How can I be sure that I’m sure without hiring a million people to look at every document to figure out what’s going on?
Given the volume of loans in typical servicing transfers, the costs of manual error detection and correction are daunting.
Derek also pointed out one of the biggest challenges in MSR transfers: the time it takes to board a loan. When it takes several days to transfer loan data from one servicer to another, it results in the homeowner’s inability to get the help they need because their loan information isn’t available yet and clear expectations haven’t been set. In this context, Adam mentioned that CFPB borrower complaints include a “good amount” received after a servicing transfer.
The standardized dataset and processes which are the goals of this group will directly target these pain points by enabling faster detection of loan-data anomalies while requiring fewer (costly) human interventions. Automation in solutions such as Sagent’s LoanBoard offers real-time or near-time loan information so servicers can provide the agile support that homeowners expect. And these capabilities will be supercharged by data that are consistent in content and format.
Another example of “better together”
Matt reflected on the grassroots nature of this group, saying that regardless of the fact that the servicing-industry participants in this program were all competing at some level, they recognized the importance of establishing a standard that could be adopted without the mandate of a regulator or the influence of an outsized industry player.
This collaboration wasn’t always easy. When the group realized their work required addressing process standards before data standards, Matt said, “I remember very clearly a small, angry mob of data people who said ‘What do you mean? We want to do data!’” But, because of the time put in by this diverse group of industry/business people — all with different priorities based on the role of MSR transfers in their organization’s strategy — the project has progressed with well-executed artifacts and is set up for broader adoption.
The effectiveness of this approach validates Sagent’s approach to crafting solutions tailored to tackle the thorniest problems in servicing. We’ve found that using intake from — and partnerships with — a diverse set of servicers yields a product that best serves the broad set of requirements based on business strategy, but is aligned with the core set of data and processes shared within the sector.
Audience question: MSR Transfer Standards
During the Q&A segment, an audience member commented, “Servicing transfers have been happening for 50+ years, and there are 30-40 large servicing companies. Is this not fairly well established? Why is it taking so long to create these standards? Should this happen faster?”
“You’d think that, but the reality is no,” said Rachael. She called back to a roundtable that was convened early in the project: “What was interesting is we had 50-70 of us sitting around a table… and it was about MISMO creating a set of data standards. But really, when we started to dive in, the pain points were around a common understanding of what made a quality transfer, then translating that into actual process… and that was the piece we had to solve before we could ever get to data. But we just keep plugging away, kind of like The Little Engine that Could, because if we don’t do this, it will be done to us.”
Clearly, there’s more to come from this initiative, and we’re eager to see the results. It’s because of work like this that Sagent enthusiastically participates in MISMO. The huge potential benefits are familiar to those of us who are driving toward homeowner-first modernization in America’s $13T+ servicing sector… a better homeowner experience, lower costs, and improved compliance.