Revisiting Collections Compliance
Five years ago, bank or credit union executives would share with us that their main concerns centered on maximizing staff productivity and efficiency, and reducing delinquencies and operating costs – all of which directly impact the reduction of Allocation for Loan and Lease Losses, increasing net income. My, how times have changed. We touched on the growing challenges of collections compliance in a post last September, and with inquiries coming into our website on a daily basis, thought it made sense to revisit the topic. Without a doubt, the most commonly heard inquiries at IBS over the past year have been focused on ensuring collections compliance in this complex regulatory environment. Whether it is Fannie Mae, Freddie Mac, or CFPB delinquent loan servicing requirements, it seems that tracking and ensuring collections compliance has trumped collections efficiency. The good news is that you don't have to sacrifice one for the other.
Collections Compliance – Child of the "Great Recession"
Looking back over the last 3 years, it is easy to identify when this shift in priorities took place. The "Great Recession" saw a surge in mortgage delinquencies begin and foreclosures, placing significant pressure on banks, investors, and guarantors alike. This led to unprecedented government interventions and startling changes in investor and guarantor collections requirements; institutions who failed to comply with these new servicing requirements risked stiff penalties for non-compliance, and jeopardized the insurance or guaranteed position on the loan. Bank and credit union collections departments were swamped with the new call and contact requirements and other new delinquent loan servicing-related activities (HAMP and Solicitation Packages, etc), and struggled to keep up with the volume of work. Many banks and credit unions were accustomed to first reaching out to delinquent mortgage debtors on day 16, after their grace period was over – if they serviced Fannie or Freddie loans, they were now required to initiate contact on day 3 of delinquency. With their focus redirected to adhering to these new guidelines and avoiding non-compliance penalties, attention veered away from other early-stage delinquencies and recovery attempts; delinquencies and charge offs continued to rise while recovery income shrank. Naturally, existing IBS clients who were already leveraging our workflow engine, knew where to turn...
Workflow Engines Ensure Required Steps are Being Met
One of the first questions we are asked about collections compliance is whether our platform can ensure that the right steps are being done at the right time. Let us introduce you to our workflow engine. An example of workflow in action would be the above mentioned Freddie Mac's QRPC contact attempts - where servicers are required to initiate contact to the debtor on day 3 of mortgage delinquency (instead of waiting until day 16, as before); not only can the IBS workflow engine automatically remind collectors and loan officers to contact the debtor on the required day, it can also initiate contact via automated Direct-Connect dialing services (where our platform assists in initiating a call to the debtor, takes them through right-party-verification, and then connects them with the appropriate bank or credit union agent). Whether it is a simple automated reminder to the collector, or the actual initiation of the call itself, IBS' workflow automation will ensure that required collections requirements are being met, and that they are also documented in the collections compliance audit trail. Another example of collections compliance workflow automation would be the automatic generation of the required Solicitation Packages (sent on Day 30 and 60 of a delinquent mortgage). Non-IBS clients would typically resort to a Microsoft Word template, copying and pasting debtor and account information into each letter – again a time consuming and laborious process. The IBS Rules Based Letter functionality completely automates Solicitation Packages and virtually any other letter – by generating the appropriate letter or package for each account at the right time, and then documenting the activity within the account's collections history journal, and storing images of the letter, for later reference. Collections Compliance concerns are easily diminished when leveraging best of breed technology.
Compliance and Efficiency Can Go Hand-in-Hand
You don't have to sacrifice departmental efficiency to ensure compliance – but you do need the right tools. Leveraging best-of-breed collections technology allows banks and credit unions to continue to maximize staff efficiency while ensuring collections compliance. While workflow engines are configured to ensure the right steps are completed and documented, and other automation tools can be leveraged t assist in streamlining collections operations that were once manual. Whether it is automating follow-ups ("ticklers"), automating letter or notice generation, or leveraging text messaging and email communications to reach a new "mobile" generation, there are a plethora of tools that are available to collections platform adopters. You can have your cake and eat it too.