There is, without a doubt, a need for regulatory innovation across the whole mortgage industry, but de-risking the mortgage servicing space is the most urgent. The industry is on the verge of another crisis with the potential to cause severe market misery due to the declining availability of mortgage loans. This time, however, mortgage servicing can ensure a more secure future for the mortgage ecosystem and produce better results for all if it depends on the tech sector to collaborate with regulators rather than seeing them as challenges to be overcome.
The direct service costs increase quickly as the severity of the delinquency status increases; the major expense types are labor and technology. Lenders currently have two choices: reduce demand by raising prices through fees or acquire more trained workers (already a difficult task) to handle the inflow. Adding extra staff to keep up with demand is not a long-term answer. Moreover, charging overpriced borrowers who are already struggling to pay is against state legislation and UDAAP procedures and worsens the situation.
Fintech companies can have a significant impact here. According to Fannie Mae, only 1% of mortgage servicers consider their back offices entirely digital. The strain on the servicing community will finally be released, and portfolios will resume their previous performance when it is possible to integrate consumer protection standards into digitally connected platforms. Furthermore, the tech stack must be subject to regulatory oversight and enforcement. Technology solutions implemented in times of crisis should be reviewed regularly. Regulators should demand reviews of data usage and underlying technologies. Lenders as well should all desire that, after all. To read more on this, click here.
https://www.housingwire.com/articles/opinion-can-tech-de-risk-the-mortgage-servicing-space/
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