A challenging new environment: two new challenges were dropped on servicers in recent times as a result of a new law and some federal government settlements. Protecting borrowers' confidential information and avoiding predatory servicing practices are two important issues for servicers.

Author:Wiser, Ron

IN THE DYNAMIC WORLD OF MORTGAGE SERVICING, a new year brings additional challenges for the servicing industry. In the current marketplace, servicing shops continue to face enormous pressure to efficiently manage loans, but also to ensure they are in compliance with all new requirements and regulations. [??] According to an article that appeared in the winter 2004 edition of Consumer Finance Update, distributed by New York--based PricewaterhouseCoopers, with declining originations ahead, lenders will expect their servicing operations to drive profits during the next two years. [??] Servicers are now faced with the challenge of minimizing cost and increasing efficiencies while continuing to properly monitor and control risk. On top of that, servicers are expected to provide the necessary level of customer service to their borrowers. Additionally, increased regulatory scrutiny related to information security and predatory servicing makes it an even more challenging environment. [??] What systems and policies do you currently have in place to proactively protect your shop from fraudulent attacks or accusations of predatory servicing?



Information security

The servicing industry is increasingly becoming more automated. In fact, borrower information is available and can be shared with third parties at the click of a button. This type of automation greatly simplifies the servicing process, but at the same time may put sensitive borrower information at risk.

According to Scott Lehrer, senior vice president of First Mortgage Corporation, Diamond Bar, California, as servicing shops rely more and more on technology, the risk of fraudulent activity increases. Lehrer says, "As technology becomes more sophisticated and many of the processes are becoming automated, it could allow fraud to permeate. [Technology] creates great advantages by streamlining the workflow and creating efficiencies, but it could also compromise the security of sensitive borrower information."

"One of the major issues facing servicers continues to be the confidentiality of borrower information," says Diane Coats, client delivery manager at Wendover Financial Services Corporation, Greensboro, North Carolina. "Information is shared electronically now, which increases the chances of fraud. Additionally, it seems that as technology gets more sophisticated, so do the fraudsters. As servicing becomes more automated, the manner in which information is transmitted and traded will continue to come under scrutiny, bringing about increased regulations and requirements."

A solid information security program is a critical component to the success of every servicing shop. Implementing such a program helps guarantee the reliability of systems and procedures, promotes continual improvement and protects the security of information. When properly maintained, this type of program positively affects every aspect of a servicing shop, ensuring it meets its internal goals, but also that it meets the needs and goals of its customers, including information security.

"Consumers are attuned to protecting their privacy, and want to feel confident that their mortgage servicer is doing everything it can to protect their personal information," says John Williamson, vice president of mortgage servicing for Johnson Bank, Racine, Wisconsin. "We value the trust our clients have placed with us, and have implemented very rigid policies and processes to ensure that all confidential information is handled in an appropriate and professional manner. All of our employees have been through an extensive...

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