There may be a role for outsourcing when it comes to loss-mitigation communications with borrowers. But due diligence is key to making it work.
As a former banker and credit union executive, I've had ample opportunity throughout my career to assess the relative merits of outsourcing one's regulatory compliance activities. Back in the mid- to late 1980s, the common viewpoint about outsourcing was that long-term employees, together with effective legacy policies and strong operational procedures, represented a fairly sound safeguard against most potential compliance threats. [paragraph] But over the years, increased regulatory scrutiny, accompanied by new and ever-changing regulatory guidance, has swayed many in the industry--including myself--to be more open-minded toward outsourcing, particularly in the area of loss-mitigation content management. [paragraph] In my current role, where I support the development of default servicing solutions, I've worked extensively with banks, credit unions, mortgage servicers and other financial organizations seeking compliant and cost-effective ways to address their servicing needs. [paragraph] Two areas of regulatory compliance that are commonly considered in deliberations about outsourcing are loss-mitigation content management and print fulfillment activities.
Effectively managing an in-house loss-mitigation document repository can be labor-intensive and costly. While not an all-inclusive list, a few examples of requisite work efforts include the following:
* Ongoing tracking and monitoring of regulatory guidance for servicing;
* An in-depth analysis of new/enhanced regulatory guidance to determine the impact on the organization's loss-mitigation content;
* Timely development and implementation of new/revised content;
* Efficiency in ongoing management of document rules (business rules and technical rules);
* Effective records management and version control; and
* Quality assurance.
In my experience, ineffective management of these tasks has led to challenges such as process and operational inefficiencies, compliance gaps, regulatory fines, penalties and, in extreme cases, the termination of employment.
When does outsourcing make sense?
How have organizations traditionally dealt with these challenges and how have these issues driven deliberations to determine which compliance functions--and to what extent--to outsource?
The following are among the top factors driving the move to outsource compliance functions.
Lack of resources required to effectively track, monitor, analyze and implement new or revised regulatory guidance: The ability to stay abreast of ever-changing regulatory guidance is essential to all organizations. Unfortunately, given the recent influx of new and revised regulations, many organizations are juggling priorities and realigning resources to safeguard themselves from critical compliance errors and omissions. Although good-faith efforts may be made, there is no sure-fire technique for getting every change successfully implemented--especially for regulations with aggressive implementation timelines.
The need to revise legacy policies, procedures and processes: Almost everyone employed in the servicing business recognizes the importance of policies, procedures and processes. Ultimately, a compliant and seamless workflow will advance your organization's efforts to meet regulatory requirements while fostering a positive consumer experience. In order to achieve those objectives, regularly scheduled updates to policies, procedures and processes are mandatory. But unless this work is given priority, updates may not be made as frequently as needed to maintain compliance.
The need for additional subject-matter expertise: The heightened complexity of regulatory guidance...