Mortgage Claims Management for Consistent Reporting & Improved Productivity
The quality of the loan is determined by underwriting policies and due diligence. It is inevitable that some loans will go bad if the deficiencies of a loan are not caught in time and the loan is sold in secondary marketing. In this course of events, the investor may require the seller to repurchase the loan if the loan is classified as deficient by the “Repurchase Agreement”
When the repurchase request is made the seller could simply accept the loss or appeal the request. The Credit Risk Repurchase Department is responsible for the underwriting of loans which investors have deemed to be deficient for certain reasons. Therefore, the objective of the Repurchase department is to appeal the investor demands of repurchasing the loans, or indemnifying the loans if circumstances so warrant. In short, repurchasing becomes a loss avoidance and management task.
“The repurchasing automation scenario might not be critical for small originators. However, it is a major problem for large originators. From a pure bottom line perspective, one bad loan can wipe out the profits of five good ones.”
What makes repurchasing a challenge is the fact that the root cause of the deficiency may have been the fault of a multitude of groups and many different people. Also, repurchasing is generally made under an investor specific Repurchase Agreement. Bank departments can also requests for repurchases in a process tat is referred to as “self-initiated.”
All stakeholders require consistent and timely status updates once the “referral” is received, and each loan has its own follow-up requests. It is imperative that the communications are tracked since repurchasing is integral to the business process. In addition, a complete audit trail is required to meet various deadlines and to maintain transparency. Usually, the process begins with an investor’s inquiry being logged. Then an appropriate response is prepared with the assistance of the appropriate business group. After that the response is reviewed, sanctioned, and submitted to the investor. If the seller is servicing the loan, the process gets more complicated.
The process repeats if the investor is not satisfied with the seller’s response. If the repurchase is the best option then the Credit Risk Department initiates the settlement process. The settlement process generally involves committee review, payment to investor and booking of the loss.
What Does Visionet Solution Provide?
The Repurchase Portal improves the effectiveness of decisions by increasing the number of successful appeals. It also increases the efficiency of the department through automating routine operations, leveraging skills, enforcing rules, and reducing departmental costs.
Visionet’s Repurchase Portal brings efficiency, value, and organize communication within various departments in a uniform and a centralized manner.
Visionet’s Solution Capabilities
- Ability to accept a variety of repurchase requests/reviews and approvals, such as B1s missing FHLMC files, demand letters, ALT letters, audits, repurchase referrals, committee approved repurchases, self initiated repurchases, bulk repurchases, HUD indemnifications, Fannie/Freddie REO offers, MI rescissions, document requests, file requests, compliance reviews/demands, credit enhancement billings and authorizations
- Ability to support 3rd party originated loans from various business partners
- The integrated workflow engine to track activity and completion, as well as automatic next task generation and assignment
- All tasks have due dates, follow up dates, and reminders dates to ensure timely completion of the process. Improved tracking of tasks and their completion also provide management with an up to date and accurate status of the loan
- The system is primarily driven by the deficiencies in the loan, type of request being processed, and characteristics of the loan. These properties of the loan could be linked to workflow templates which drive the business process. Statistics collected on the outcome of the deficiencies could be used as guides for the users in future cases
- The workflow engine automatically assigns tasks to teams based on defined business criteria, which includes team skill set, load, and characteristics of the loan
- The system could be integrated with the existing data warehouse to retrieve the loan level information and utilizes MS Office application suite on the user’s desktop for enhanced information sharing between departments
Bringing Order to “Controlled?” Chaos = Reduction in Losses
- Deadlines Management – all Demand Letters issued by investor have deadlines for actions e.g. deadline to appeal, deadline to complete repurchase, etc. Processing of these requests needs to be completed within the deadline to avoid costly penalties and/or recourse
- Reduction of Liability – the primary objective of the Repurchase department is to reduce the business liability and/or loss associated with a repurchase. To achieve this goal the department strives to maximize the appeals over indemnifications and repurchases and Visionet’s solution foots the bill
- Enforcing Discipline – as the servicing portfolio grows the Repurchase departments have to handle more cases. In addition, the investors have also embarked on a more aggressive auditing policy that is expected to increase the volume further. Therefore, to keep costs manageable, the departments need to build more capacity while enforcing discipline through technology. Visionet workflow enabled solution is designed to do so
- Investor Reporting – investors demand status and pipeline reports on the outstanding cases on a regular basis, and these reports need to be submitted by the department. Visionet automates this process and provides a web portal for this purpose
- Management Reporting – SOX requires timely reports regarding the repurchasing risk performance and scorecards, as well as the status of the cases in the pipeline. Visionet’s solution provides visibility into the whole repurchase activity through a portal on a real time basis