Gagan Sharma of BSI Financial Services on Future of Mortgage Servicing
By MBA Insights Staff
July 3, 2018
Gagan Sharma is President CEO of BSI Financial Services, Irving, Texas, which specializes in loan subservicing and special servicing, loan quality control, REO/asset management and loan loss mitigation services.
Sharma acquired BSI from its former parent in 2006 and transformed the company from a small lender into loan servicing provider, growing BSI by more than 70 times since his acquisition. He was recently named EY Entrepreneur Of The Year 2017 Award Finalist in the Southwest Region.
Prior to acquiring BSI, Sharma founded a global outsourcing company serving the financial services and technology industries. He raised institutional equity financing and increased its labor force to more than 1,200 people before selling it. Prior to that, he was a consultant with Deloitte, advising clients on matters of strategy and operations in the financial services and high tech industries.
MBA INSIGHTS: What trends do you see shaping the future of mortgage servicing?
GAGAN SHARMA, BSI FINANCIAL: I believe the biggest trend shaping the servicing industry is automation--and I'm not talking about last year's automation. The world of servicing has changed dramatically over the past several years. Every servicer and sub-servicer deals with a high volume of borrower contacts, both inbound and outbound, that needs to be integrated and documented within their servicing system. But they also constantly exchange information between third parties and are required to keep up with new and changing regulations and loan guidelines in multiple jurisdictions. In addition, they must develop an efficient, consistent means of communicating regulatory changes with members of their teams who work directly with borrowers.
This is an overwhelming amount of information to keep up with, and the only way to manage it efficiently is by leveraging technology to automate as much of the exchange of information as possible. For this reason, more servicers are looking at big data and artificial intelligence tools to support their automation initiatives. Our industry can also learn a lot from other types of financial services, such as online investing and credit cards. We need to streamline and simplify the borrower experience, while ensuring accuracy and compliance using new technology tools.
INSIGHTS: How do you leverage data and analytics in your daily operations?
SHARMA: When you manage multi-billion loan portfolios, it's important to approach it from a big data standpoint. The goal is to identify exceptions before they become problems, an approach we call Exception-Based Processing.
Five years ago, these challenges led to the creation of BSI's proprietary data and analytics platform, ASSET 360. We import more than 10,000 data elements on every loan every day into ASSET360, including all collection comments, transaction history and loan status updates. Using these data, we provide clients with transparency on their portfolios that they never had before. They now have the option to track portfolio performance, either on Asset360 or, if they have built their own systems, through fully customizable reports that leverage their internal data, which we also provide.
Through automation, we can run exception checks on more than 800 business rules on entire portfolios in just seconds. Any loan that has an exception is also automatically routed to the appropriate operations, administration and onboarding teams to be resolved. Once the issues are addressed, those loans automatically fall off the exception report the following day. This allows our operations team to isolate and prevent issues from escalating into larger problems, while, borrowers receive the right service at the right time.
INSIGHTS: What strategies improve ROI most for your clients?
SHARMA: We believe client ROI comes from a combination of improved borrower satisfaction, reduced cost and increased customization.
For example, we have built digital and mobile tools to streamline and improve the borrower experience. Through our web application, borrowers can make payments, review their loan statements and apply for loss mitigation in case they are facing hardship. With more consumers now buying products and services through mobile devices, we developed a mobile app that allows the consumer to do everything on the cell phone that they could do via the web.
From a client's standpoint, our data analytics and automation capabilities definitely improve ROI. Our automation and Exception-Based Processing approach, which I mentioned earlier, reduces our own costs, which we pass on to our customers. Our clients also want solutions that are customized for their processes. Our technology platforms allow us to create private-label solutions, customized data interchanges and a-la-carte solutions that deliver greater value for our clients.
INSIGHTS: How is working with investor portfolios different from working with bank or non-bank portfolios?
SHARMA: The nature of the relationship is different. Most investors usually specialize in a certain type of loan portfolio, whether it's performing, non-performing or re-performing. Investors that have specialty servicers to act on their behalf may delegate certain authorities to them, and if certain thresholds are breached, they may require loan-level approvals. For this reason, it's important for a specialty servicer to be able to communicate electronically with investors and provide a single platform where they can access and view their portfolios and perform audits for portfolio reviews.
INSIGHTS: We are now in the 2018 hurricane season. How do you prepare for natural disasters, particularly following the hurricanes and wildfires of last year?
SHARMA: Natural disasters often create a rush of defaults that can overwhelm smaller servicers, especially those whose portfolios are concentrated in the disaster area. The only way to prepare is to maintain a combination of technology, processes and scalable operations.
Technology is obviously critical during and after an emergency, when the volume of borrower communication skyrockets. Technology also enables servicers and sub-servicers to coordinate services with third parties. And data security and redundant, off-site servers are critical as well. But managing defaults in the wake of an emergency takes more than technology. Servicers need the skills and experience to determine how to scale quickly in an emergency situation, all while staying compliant. The key is never being complacent.
INSIGHTS: How are new compliance and regulations in mortgage servicing having an impact on the mortgage servicing business?
SHARMA: Compliance with mortgage servicing regulations is a top priority. While we embrace compliance and regulation, it is a constant challenge to keep up with frequent regulatory changes.
It has been 10 years since the peak of the mortgage crisis, and our industry has more rules and regulations than ever. My hope is we will eventually reach more clarity, consistency and transparency in terms of the rules and guidelines servicers are required to follow.
INSIGHTS: What are some successful tips for working with borrowers who have non-performing loans in order to make them performing loans?
SHARMA: The biggest challenge with working with borrowers who already have non-performing loans is getting a conversation started. Many people who have financial difficulties simply choose to avoid dealing with them altogether--it's part of human nature. One way we've been able to help is by creating a mobile app that enables borrowers to manage their mortgages using their tablet and mobile devices. The app lets borrowers verify loan payments and make one-time or ongoing loan payments through their bank accounts. Borrowers who are in default can use it to monitor events and milestones in the loss mitigation process. In fact, we have seen a number of borrowers who were in default use the app to help them get current on their payments.
As a specialty servicer, it's important to make every effort to find the best financial outcome for every borrower. Of course, we as an industry learned during the downturn how important it is to reach out to borrowers who are experiencing financial difficulties before they begin missing payments. Technology can be a huge help here. For example, if we know that a borrower pays their mortgage on a certain day of the month, and that day comes and there is no payment, we have the ability to contact the borrower to see if we can help. It takes hard work, consistency and diligence to turn around non-performing loans, but when you're successful and your borrowers are able to keep their homes, the effort is really worth it.
(Views expressed in this article do not necessarily reflect policy of the Mortgage Bankers Association, nor do they connote an MBA endorsement of a specific company, product or service. MBA Insights welcomes your submissions. Inquiries can be sent to Mike Sorohan, editor, at firstname.lastname@example.org; or Michael Tucker, editorial manager, at email@example.com.)