Life-Cycle Lending: Gaining Efficiencies

*Gaining Efficiencies*
**By Joe Dombrowski**

***With current market conditions, it is increasingly important for servicers to change their approach so they can fully understand a customer’s loan relationships. Lending operations that cannot provide a complete and real-time snapshot of the customer are severely limited. They lack the knowledge of that borrower’s total credit exposure to their institution. Without a consolidated servicing back office, they also are unable to effectively manage the loans associated with each portfolio.

****Adopting a consolidated strategy gives servicers a more complete picture than knowing just the current balance of a loan. It also gives the lender an understanding of the status of second liens, how much total debt the customer has, how a delinquent mortgage is affecting credit and what revenue opportunities exist. Servicers certainly need to be nimble when it comes to product and process, but it doesn’t stop there.

****Being transparent will become foundational to how servicers relate to customers as well as to investors and regulators. Transparency not only enables insight into servicing processes and practices, but it also means being able to pass along transactional data to those that request it, when and in the format it is required.

****Reporting and analyzing customer data is becoming the norm for servicers, regardless of portfolio mix. Immediate access to borrower information, account transactions and investor data is critical to institutions positioning themselves as industry leaders. Customer service personnel will be better trained (and better scripted) to explain fees, loan histories and rate changes. Investor reporting personnel will be versed in technology that pushes data to investors instead of simply sending standard reports. Collectors will become better at counseling borrowers about sustainable loss mitigation agreements.

****In fact, productive default management and loss mitigation efforts begin with good data. Lenders that can access all the data at hand are best prepared to prevent a late payment from snowballing into an unpreventable default and to protect their portfolios and balance sheets against insurmountable loss. By linking the borrower in the back office, lenders have important analytical information in one place and are better positioned to freeze credit lines or lower limits based on changes in the borrower’s financial status and behavior across all loan relationships.