We already know that servicers have to balance the needs of tech savvy consumers and more tenacious regulatory bodies. Consumers are more knowledgeable and want real-time access to their accounts, make a payment and/or talk to someone at their discretion. Federal regulatory agencies, such as Consumer Financial Protection Bureau and the Department of Housing and Urban Development, want to protect consumers from any unscrupulous financial practices. Some of these same regulatory agencies now regulate vendors’ relationships with servicers or lenders. Trying to satisfy the two does not have to be double efforts. Servicers can have a synergy between their consumer management system and vendor management systems that provide complete transparency and at the same time create reports for management and auditing purposes.
While I understand and believe in the need to protect consumers, regulations are extremely restrictive and the best way for servicers to do this is to focus on using their current internal data to create better, cost effective vendor management processes seamlessly.
In order to be productive and survive any federal audits, servicers have had to adjust to not only understanding vendor management requirements but educating their staff, implementing processes and systems that can help them with the process. They have modified their current day to day practices to include vendor oversight efforts. This has included educating their staff about ever changing regulations in addition to possibly adding new technology. And as if that isn’t enough, they must repeat the process with every single one of their service providers. The kicker is if these service providers cannot comply with regulatory requirements, the lender/servicer unfortunately is forced to find an alternative service provider. This process takes precious and valuable time away from their core business, originating or servicing loans.
So imagine if you will, a scenario that would include effective, ongoing regulatory monitoring for compliance, having a viable contingency plan in place, notification of any updates that staff need to be trained and made aware of and having this done in real time without hiring a staff to maintain it. It is possible to make this happen but with proper planning by the servicer. During the development or purchasing of a vendor management system, servicers need to consider major factors that can affect how they perform, such as updating, educating and training around regulations that are constantly changing. It becomes imperative for servicers to have a robust and adaptable system. In fact, with the right system, whenever there is a change in regulations, the system’s provider should provide the update. Such a system should provide a seamless update for users. Adapting to such a system can save the servicer time with immediate updates and money by avoid regulatory fines.
Servicers survival now depends on adhering to these regulations, and even further, adapting to the regulations in a cost effective manner. They can either develop their own technology from scratch or license the product from other vendors. I would think they would turn to a trusted third party that would provide user-friendly technology that can be easily configured to the latest regulatory changes along with stellar customer service. Going this route will help servicers focus more on their core business; servicing loans and meeting the needs of borrowers.
About The Author
Pramod Karachur is project manager at IndiSoft, a technology company that specializes in systems for the financial industry. In his six years at IndiSoft, Karachur has implemented various grant programs, worked with multiple servicers such as Wells Fargo and Bank of America and thousands of non-profit and for-profit counseling agencies. He can be reached at firstname.lastname@example.org.