We'll see you in Texas! Our National Tax Search team is excited to exhibit and speak at the Mortgage Bankers Association’s National Mortgage Servicing Conference and Expo taking place this week just outside Dallas, Texas. As the saying goes, everything is bigger in Texas, and this conference fits the bill. We’ll be mingling with mortgage servicing executives from across the country to discuss hot issues, trends on the horizon, and best practices to help our peers keep pace with the massive growth our industry has been experiencing.
National Mortgage Servicing Conference & Expo 2018
To that end, there is no shortage of fascinating topics that we suspect will be discussed during the show. Among those there are a handful of trends that I believe are worth calling out, because they have the potential to drastically increase or decrease risk for mortgage servicers, depending on how servicers approach the issues at hand. It pains me to see servicers putting themselves at risk, so I’ve addressed each trend very briefly below, with my thoughts on most appropriate actions and considerations. I'll plan to expand on these and other pressing issues in coming weeks.
Delinquencies are starting to stabilize, but are still a ticking time bomb. Don't blindly trust the numbers.
In my 30-plus years working in the mortgage servicing and real estate management industries, I’ve seen my fair share of ups and downs in delinquencies across the nation.Although hurricanes Harvey, Irma and Maria drove up the U.S. mortgage delinquency rate in the fourth quarter, overall mortgage performance continued to improve in 2017, according to Black Knight’s Mortgage Monitor Report. Transunion expects the mortgage delinquency rate will drop to its lowest level since 2005.
While I appreciate the jubilance that may come from delinquencies being on the decline, I think the dip in delinquency rates may be a ticking time bomb and should be watched carefully. Regulations are lightening up a bit, but I caution against swinging the pendulum and reducing restrictions on mortgages too soon. Dips like this aren’t sustainable in the long term. There is too much global strife, national economic uncertainty, not to mention what seems like an abundance of natural disasters, facing the market right now. I’ll report back after the conference to share more insights and predictions on this matter, gathered from the show floor and my esteemed industry colleagues.
HOAs and COAs can sneak up on you. Be prepared.
Homeowners Associations and Condo-owners Associations can force mortgage lenders to pay delinquent assessments. Though a homeowners association lien is junior to tax and certain mortgage liens, an HOA still can foreclose using it. Homeowners association and condo owners association super liens are considered "true priority" liens in a growing number of states, holding a higher priority in foreclosure than a property's first lien mortgage. Too often, servicers incorrectly assume they can service HOA / COA properties like any other properties, but this is an assumption that can have disastrous consequences for the servicers. For lenders, this is a massive risk. If a lender is not aware a property owner is not paying their HOA fees, the lender can lose that asset.
To mitigate this growing risk, mortgage servicers should be sure that if they do have an HOA they are paid up -- just like they would in property taxes. This means lenders need to track HOAs early, often, and diligently to ensure they're being paid. That’s easier said than done, though, because there are countless numbers of HOAs, and they are not government controlled, making them more difficult to manage. It’s critical that lenders and mortgage servicers work with third parties who can determine if there is an HOA and manage every step of the process to get ahead of the pitfalls, so the impacted parties can put money away in escrow or make sure the borrower is paying on an ongoing basis.
Automation is the key to reducing risk and driving efficiencies.
It's a given: everyone in the mortgage servicing industry wants to cut time out of inefficient, manual, time consuming processes. But even more than time savings, manual processes leave too many opportunities for human error – equating to huge risks. Those risks were no more apparent than in the crash of 2008. Consider this example: prior to the crash, one of my large clients had been updating its non-escrow loans once a year – due in part to the fact that the process of making those updates was exceedingly slow and laborious. The problem with that timeframe is that they could potentially have lost property in that time. We pushed them to take data in more often, and because our technology automates the intake and reporting process, we were able to give the client up to date details every week. Six months later the market crashed. Luckily, the team didn’t have to panic, because they knew every current detail about their non-escrow loans. Without our frequent checks and balances in place they wouldn’t have had any idea where their loans were.
I look forward to delving into these issues and others during the MBA conference this week. I'd love to hear your opinions and discuss some of the other trends you see impacting the industry. I invite you to visit me in our National Tax Search booth or join me to our demo on the side stage Wednesday, Feb 7 at 10:15 a.m. We'll share our takeaways from the event back here on our blog.