Perfecting the initial warranty – theMReport.com
Collateral management is a crucial but often overlooked part of any loan life cycle. However, establishing the status of this warranty early can help avoid headaches and pitfalls later.
From origination, through secondary market efforts and loan servicing, there are many sources of income that support the mortgage finance industry. The role that collateral plays throughout the life of a loan is often overlooked, as is the effect that the condition of that collateral will have on profitability throughout the process.
Nationwide Title Clearing, Inc. (NTC) has spent more than 30 years helping lenders, service providers and investors realize additional profits through collateral management and collateral-related services. Here are some of the best practices that NTC has adopted along the way.
Why a perfect initial guarantee?
It’s no secret that maintenance costs have increased exponentially over the past decade. Penalties for investors, remediation costs, consumer escalations, foreclosure delays, late release penalties, etc. all played a big part in this.
However, these expenses can be reduced, controlled and budgeted with precision through the application of strong collateral management processes. Additionally, MSR or total loan transfer fees can be significantly reduced through proactive collateral cleaning efforts before identifying pools for sale. The results have a huge impact on many sensitive points in this business area, such as post-transfer exception handling, redemption requests, reactive remediation costs, missed recertification deadlines and late payment of claims. deductions.
When it comes to old loans acquired, additional challenges and unforeseen expenses accumulate due to the discontinuance of the closing agents, the accessibility and cooperation of the borrower for any necessary execution. and new, stricter regulatory guidelines, for example.
What are the challenges to consider?
1. Loan source
Branches, wholesalers, retailers, brokers and correspondent loans are all bringing new mortgages to our industry. Add to that the influx of mortgages that a manager may have due to acquisitions, which creates considerations and challenges.
Inconsistencies in procedures and processes across each source present numerous challenges, which have contributed to the large amount of problematic warranties unnecessarily cluttering up lines of business.
Monitoring of closing agents, integration of seasoned loans by acquisition, monitoring and reporting by third parties, monitoring of warranty exceptions, management of MERS compliance, etc. are all challenges to consider.
Understanding these issues and developing workflows to properly manage and manage the inconsistencies of these various products is the key to the success or failure of maximizing profits and minimizing the amount of resources and personnel required.
2. Lifetime of loan events
There can be many stages throughout the life of each loan. Starting at origin, then working through service / sub-service agreements and any loss mitigation, bankruptcy or foreclosure, warranties play a vital role every step of the way. Then you have the loan maturity and repayment process, where a full collateral is the key to the lien compliance release. Problematic guarantees reduce the effectiveness of each of these milestones and open the door to additional expense and exposure.
Maintaining control of the warranty workflow helps reduce service costs, maximize sales gains, and reduce exposure, resulting in increased portfolio value and service profits.
It really isn’t a question of whether you should take care of the warranty status, it’s when. The warranty will need to be processed at one point or another. NTC’s experience in building services around reactive and proactive approaches proves that the expense and exposure involved in the initial treatment of the problem is far less than the costs of its treatment when the situation demands it.
NTC has a proven track record in identifying and creating processes that effectively and efficiently manage collateral throughout the life of a loan.