Although just in its infancy, the Internet will play a growing role in mortgage servicing in the future.
IN THE MORTGAGE SERVICING WORLD, ERIC JOSHU PROBABLY HAS THE MOST UNLIKELY JOB. While most mortgages in the United States are originated and serviced by private financial institutions, Joshu does the same for the federal government.
* Joshu holds the title of deputy director of the Centralized Servicing Center for the U.S. Department of Agriculture (USDA) Rural Housing Service. He can be found in St. Louis, Missouri, where as part of the Department of Agriculture his agency services direct loans that are made to low- and very-low-income borrowers and families in rural areas.
* One might think the government would have outsourced this work to the private sector, but as Joshu explains, "the reason we service the loans ourselves is because of this very diverse clientele. By definition, we service low-income folks in rural areas who have multiple financial challenges either due to income, language or education barriers. A large portion of our portfolio is elderly. As you can see, our mission is a little different from the private sector."
* The loans Joshu services are a bit different as well. For one thing, the interest rate is modified by a payment-assistance subsidy. Plus, the origination system has to take into account unique government rules and regulations.
Despite these peculiarities and the low income level of the clients, Joshu is already anticipating his business moving to an Internet, or Web-enabled, browser program.
"We have looked at Web-enabled systems, but we do not think we are ready at this time," says Joshu. "We definitely like the concept. In terms of using the Internet, we want to be able in the near future to offer the same services that we have now in a voice-response system [getting payment information, loan status, principal balances, etc.] through Internet accessibility. We want to be able to answer our borrowers' basic questions and have customer-initiated payments through the Internet."
Of the business side of his operations, Joshu says, "we have [more than] Soo rural field officers [who] also originate loans and help provide customer counseling to our borrowers. We would like to use the Internet to give them access to the same information that we have here in St. Louis. When we speak to a borrower, whether in St. Louis or in a field office in rural America, we should all be looking at the same information."
Joshu knows that his agency's change to an Internet-based system is not that far away. The technology to do all this work is already coming into existence and might have been up and running already, but the loan industry's initial infatuation with the Internet was mostly on the origination side and it has taken a bit longer for the servicing end of the business to catch up.
"Clearly, at the very beginning of the Internet technology revolution, the interest was on the sexy side of the business: origination," says Richard Beidl, director of Global Mortgage Lending Practices with Needham, Massachusetts-based TowerGroup, a research, advisory and consulting business. "If you can offer your customer a better origination experience and faster pricing and loan decision, that makes a difference as to how competitive you are in the marketplace. There has been no evidence that a customer will say, 'Well, I'm going to this institution for a loan because I can get my account serviced via the Internet,"' he says.
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