At last we are seeing significant uplift activity within lenders in the generation of new residential mortgage business and the time will soon come when the “spotlight” turns to the servicing of these loans as volumes increase.
Historically, within lenders, increased volume has resulted in either a less than stringent focus on the quality of the new business or a diversion of resources from other areas to manage the volumes. That diverting of resource can cause considerable knock on detrimental effects, with one of the potential casualties being the management of external suppliers.
We are of the view that there will be more intense supervision by regulators in this area and they will find gaps in firms’ processes for supplier selection, including the selection of mortgage servicers, asset managers and other professional suppliers. As a result, lenders and owners of loan books need to ensure the appropriate controls are in place and policies and procedures are being adhered to.
The regulatory requirements that are now in place mean that data needs to be accurate and collections and complaints procedures need regular independent reviews. We have carried out reviews of third party supplier contracts, to make sure they are up to date and relevant, and have compared them to the work actually carried out, providing proper and meaningful GAP analyses and have suggested improvement solutions, where they are needed.
The use of an independent company to implement a proactive approach to third party supplier oversight should result in these benefits:-
• Cost saving solutions – variable v fixed costs
• Internal re-assurance – that everything is in order. Of course, if there are issues to be addressed, recommendations on solutions are included
• Proof to the regulator that quality control and supervision principles are fundamentally set within a business
• Resource flexibility – the ability for lenders active in new origination to use internal staff to support the areas which are under pressure.
If you cannot identify any of these benefits within your own organisation, it may be that a review is overdue.