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Client Bulletin: June 30, 2022

To our Client Partners:

As we continue to refine and strengthen our organization, I wanted to provide you another update on the work we’re doing in risk management.

Within this issue of the Client Bulletin, you’ll find a conversation with four Cenlar leaders who are leading the charge in their areas of operation: Erin Sullivan, Director, Third-Party Operational Reporting; Tara Hickson, Director of Operations Production, Property Insurance; Scott Rodeman, Vice President of Default Operations; and Kathleen Lenihan, Manager of Special Products. Together, they exemplify our philosophy of continual improvement, minding our risk profile to ensure our clients and their homeowners have the very best experience.

In this newsletter, you’ll also see a profile on our new chief information officer, Steven Taylor, which includes his thoughts on the technological transformation already underway at Cenlar.

Providing the service you deserve means we’re always evaluating how risk enters the equation. This includes thoughtfully innovating for the future while never forgetting the important details of our day-in, day-out business.

Also included within is important information about the VA Partial Claim Program, our latest update with Cenlar leadership and the upcoming July 4th holiday.

We hope that you find this update useful. Our team will continue to keep you current on these and other improvements being made to shape the excellent service we deliver to you and your homeowners. Thank you for allowing us to be your trusted partner, each and every day.

 

Cenlar’s Operations Teams Continuously Improve with a Steady Client and Homeowner Focus

Fundamentally, mortgage servicing is about collecting homeowners’ mortgage payments and distributing them in a timely manner to investors, insurers and tax authorities. While that may sound fairly simple on the surface, in reality, our professionals must keep up with complex and ever-changing regulatory and compliance requirements, leverage new technology and

understand and stay ahead of economic and societal currents that influence homeowner behavior and expectations. The complexity of the mortgage business means that the devil is in the details, and that is why the ongoing reviews and analysis of risk profiles across the company are a critical undertaking for any size organization. Cenlar is dedicated to producing a seamless experience for clients and their homeowners.

We recently spoke with four of Cenlar’s operational leaders about the roles they perform and the trends they are observing. They lead just a few of our many areas across Cenlar that are assessing and continuously improving their area’s risk profiles.

You’ve each been in mortgage operations either at Cenlar or elsewhere for many years. Tell us a little about yourselves and your roles here at Cenlar.

 

 

Erin Sullivan: My job is Director, Third-Party Operational Reporting. I manage the reporting functions in three groups: default, credit and year-end. Our job involves supplying required information to external parties. Some of the entities that we’re required to report to include the GSEs in relation to defaults, credit bureaus in connection with credit and the Internal Revenue Service at year-end. In our functions, timeliness and accuracy are vital. I’ve been with Cenlar for 15 years. I started out in the call center, where I was exposed to a lot of different disciplines and learned much about servicing. I was a liaison in the call center to areas such as cash management and default. I even did some part-time work in collections when they needed extra hands. 

Tara Hickson: I’m Director of Operations Production, Property Insurance. I’ve been at Cenlar for 10 years, within the escrow area. My area is responsible for ensuring adequate and continuous coverage for all loans within the portfolio. Our responsibilities include the remittance of insurance premiums for escrowed accounts as well as the annual tracking of non-escrow policies. The area is also responsible for managing the loss draft process when damage occurs to a property.

Scott Rodeman: My role is Vice President of Default Operations. I oversee our loss mitigation efforts. When homeowners need help to afford their mortgage payments and avoid foreclosure, we assist those homeowners by restructuring their mortgages. Nobody wants to foreclose; it’s always a last resort, and loss mitigation is really focused on foreclosure prevention. I joined Cenlar in March 2021, bringing 25 years in mortgage servicing, specifically in default management loss mitigation.

Kathleen Lenihan: My title is Manager of Special Products, which means I’m responsible for ensuring we have all proper controls and processes in place to service any unique loan product or service that’s offered. We assist with products including ARMs, balloons, step-rate mortgages, assumptions and partial releases. An important function is monitoring loans to homeowners who are eligible for protection under the Servicemembers Civil Relief Act (SCRA). I’ve been at Cenlar for 16 years, starting in mortgage insurance and later exception processing.

 

Cenlar is in the midst of an extensive process review aimed at continuous improvement of operations. How does that impact your jobs and your teams?

Rodeman: When you’re in the middle of a transformation, the challenge is to create change while actually running the operation. I’m attracted to the opportunity to drive change, and I’ve focused a lot on that in my career. We are identifying opportunities to be best in class for both clients and homeowners. Default Operations works with homeowners at a very delicate stage, and we are committed to protecting their rights and making sure they have access to all the benefits they need to have a successful homeownership experience.

Lenihan: There’s awareness across the organization that the stakes are high if you’re not proactive about key areas of operational risk. There’s reputational risk, homeowner harm, regulatory impact and investor exposure. As an organization, we are placing a big focus on this. For every exposure we have, we have mitigating controls. I’ve mentioned that the Servicemembers Civil Relief Act, or SCRA, is an important aspect of Special Products. It’s a complex topic that introduces compliance risk, because there are both federal and state requirements to consider. An individual who is called up for the National Guard in a particular state may or may not qualify for federal SCRA protection, for example. We’ve had a state matrix in place for some time to sort through the decisions. We have and will continue to drill into state requirements to make sure we have solid controls and validated secondary reviews.

Sullivan: In Third-Party Operational Reporting, we’re acutely aware that credit reporting impacts people’s livelihoods. If we report inaccurately, it can damage the homeowner, and in turn our client satisfaction. Submitting credit information sporadically or delaying transmission of information can have an adverse impact. And with the IRS, we are impacting 100% of the homeowners we have in the system. Delaying or getting it wrong can mean additional accounting, tax preparation and costs for a homeowner. The expectation is that we do things right and deliver excellent service. The majority of the work in all three of my areas is automated, with limited manual intervention. And we continue to work diligently to enhance existing controls while constantly assessing our processes.

Hickson: Continuous improvement is about the ongoing effort to do better. It rests on the belief that a steady stream of improvements, well executed, will have transformational results. For Property Insurance, that means continuing to find new ways to improve the customer experience including the way we communicate with the homeowner. We are focusing on providing opportunities for homeowner’s to self-serve and access their insurance information from anywhere.

What would be an example of process improvement resulting from automation?

Hickson: In a recent effort to identify automation possibilities around the tying of loans for the same property address, we found that some property address records did not match up precisely. One of the reasons for this is related to manual entry and how it can introduce inconsistencies. Mismatches can happen if addresses differ in some small detail, such as one data source saying 111 East Main Street while another says 111 E. Main Street. To fix this issue, we were able to automate a process to help us identify a single property that appears in two or more sets of records so that we can tie records together. Using robust criteria and logic to make the connection and match files reduces the need for manual review. The result is that we reduce inconsistencies and enable our team to focus on other important work for clients.
Lenihan: : We’ve noticed something similar in Special Products as we perform checks against the Department of Defense Manpower Data Center website. When we’re reviewing SCRA status, we do a proactive search against that site to get a DOD certificate. In the past, we would conduct a loan-level search using key identifiers such as date of birth and last name, and it might take 10 minutes to generate the certificate if there were no hiccups. Now, working with one of our vendors, not only is it faster, but we can search by name variations—for example, if the name is McDonald, we can pick up the record whether there’s a space between Mc and Donald, or a Jr. after the name, because the software searches through name variations. We are both shaving time from the process and improving accuracy.
Sullivan: A good example of the work we’re doing in Third-Party Operational Reporting involves the Fair Credit Reporting Act. Under FCRA, when a customer submits a dispute, we have 30 days to respond accordingly. We need to be sure that we’ve responded to 100% of disputes within 30 days. Our tasking system generates daily and monthly notifications assuring timely reporting.

How do improvements in the control process and increased automation translate into the ability to deliver top-quality service?

 

Rodeman: It’s significant. I think one clear benefit of automation has been to make it as easy as possible for homeowners to engage with us and to help overcome any fear they may have of talking to their mortgage servicer.

How did this occur? In Default Operations, a lot of the manual work has been automated over time, creating capacity for higher-quality human interaction. This has been vitally important during the economic upheaval of the pandemic. Workflow technology is helping us to guide conversations with homeowners and ensure that all are receiving consistent treatment as required by regulations.

We all understand that foreclosure is not the goal of the Default Operations process. Foreclosing creates loss for the lending institution and the investor who owns the loan. It displaces families, it’s a blight on the community, and it hurts property values. Our job is to get the homeowner to tell us about their situation and educate them on steps they can take and how we can help. Another thing that has changed dramatically is that restructuring a mortgage isn’t as complicated as it once was. We have replaced the manual underwriting with automation to assure the quality and accuracy of the decisioning and resulting payment modifications. Early detection controls assure the modification is closing on time.

It sounds like the core value of caring for homeowners is deeply embedded
in everything you do.

Hickson: It definitely is. It’s a major part of who we are. We are acutely aware that we have the ability to impact our clients’ homeowners and we strive to treat them as if they were our own. We want those experiences to be positive.

In my area of Property Insurance, we make sure we’re part of the dialogue when the GSEs are considering changes to insurance or property claim requirements that affect the homeowner. In 2020, we were advocates for making it easier and quicker for homeowners to access insurance proceeds, which are called loss draft funds in our industry. We know that when property damage occurs it becomes a difficult situation for the homeowner. Having to navigate the insurance claim process and timelines with the carrier and the possible monitoring of funds that occurs in our process makes it even more challenging. As an industry, there were much needed changes to ease the process for the homeowner and reduce the amount of time it takes for the funds to be disbursed, allowing the homeowner to complete repairs faster and get back to a place of normalcy. As a result of the GSE changes to increase the release limits and reduce the contractor and document requirements more proceeds can be released upfront to the homeowner — as well as reducing the steps to get their insurance proceeds. The goal was to get the homeowner back into their home with the property repaired back to its original condition. That’s an outcome that is based in our foundation of caring for our clients’ homeowners.

How do you see this process of continuous improvement playing out at Cenlar?

 

Sullivan: This is not a one-time thing. It’s an ongoing, constant process. In Operational Reporting, we have a combination of six GSEs and investors with different guides that we have to follow. We are always looking at process improvement and compliance change management to make sure we’re up to date with all of the changes within my oversight. Over the past year, due to all of the recent regulatory changes, my teams have documented all our process flows and completely remapped and enhanced risk controls, identifying areas where we can be more proactive than reactive. It’s been a great process.
Lenihan: In Special Products, we will continue to look at any processes that are repetitive or logic-based, and ask if we can automate those processes to reduce risk and opportunity for human error.

Rodeman: As a relative newcomer who arrived at this organization with long experience in the mortgage industry, I have seen that Cenlar is enhancing its sophistication to reflect its size. This is a company that is focused on controlling risks and outcomes and operating highly efficiently. That is a never-ending journey.

New CIO Steven Taylor’s Perspective on Transformation at Cenlar

Since coming on board in April as Cenlar’s new Chief Information Officer, Steven Taylor has gotten a closer look at Cenlar’s commitment for technology—a commitment he’s found to be of the highest caliber.

Technology, he says, must “always be in front.” It’s a lesson he’s learned over a 35-year career in financial technology, which most recently included 10 years as a management consultant. He has spent the past decade guiding IT transformation, design, deployment and integration initiatives.

Taylor, who previously held senior management roles at Fidelity National, says since he joined Cenlar he has identified opportunities to further enhance our technology.

“Over my career I’ve been captivated by constantly building and transforming, whether that was mainframes, or networks or call centers,” he says.

A Strong Team Making Steady Progress

He’ll be building on top of a foundation that is already well developed. Taylor inherits a strong team of 200 people who have been steadily focused on establishing a culture of continuous improvement at Cenlar — all while making substantial changes to Cenlar technology.

In addition, Cenlar has created a risk governance framework that clearly lays out the roles, responsibilities, and accountabilities of the board and management. This framework manages risk across multiple areas of operations, including technology.

A strategic planning process is also underway aimed at allocating IT resources to achieve short- and long-term goals in line with the overall business plan. An IT asset management program is in place to ensure that hardware, virtual, and software assets are protected, maintained, serviced, and replaced in a risk-based, disciplined way.

According to Taylor, those activities set the stage for Cenlar to establish itself as a dynamic, technological organization.

“Cenlar has been working to strengthen and refine technology management and technology governance to support the needs of an increasingly sophisticated business,” Taylor says. “It’s an exciting time to arrive, and to see all the possibilities for Cenlar to truly excel in harnessing technology across the organization to support our mission of helping clients succeed by providing a great experience for their homeowners.”

Redefining Technology as a Business Asset

Taylor says he intends to hold onto the best lessons he has learned as a consultant while embracing and helping to shape Cenlar’s next chapter as part of the team.

“One thing consulting has taught me is that if you’re not showing a business value all the time, technology isn’t viewed as an enabler,” Taylor says.

He believes this perspective is particularly relevant to a growing company like Cenlar, which defines technology as a strategic business asset. Combining nimble, responsive technology and automation with effective controls and risk management is a constant balancing act.

“Every technology decision should have a material business value,” he says. “In a company that is always trying to grow and innovate, we need to lean forward with our technology.” A basic example would be that as the company rolls out a Windows upgrade for its desktop users, it is simultaneously preparing the environment for the next transition to ensure it will progress smoothly.

Another challenge companies experience as they grow, Taylor said, is that they often have the same people maintaining and building systems, which can make it hard to set priorities.

Fortunately, Taylor has arrived at an organization that is well into a mindset change with respect to technology. Josh Reicher, Chief Digital Officer, heads the team that is behind a host of innovations, including a new mobile app, a new website, a chatbot and a modernized live chat.

“We look at technology more as an investment and less as an expense, and we’re seeing the results,” Reicher says.

One example, the cloud migration, is well underway. Resiliency and redundancy are key in any cloud strategy. Cenlar is moving to a safer environment reducing downtime impacts. As we look one to three years down the road, there will be additional capabilities that our employees gain as a direct result of our cloud migration.

“Maintainers make sure your processes get done right every time. Builders are looking at how to improve those processes,” Taylor says. “At Cenlar we have both and that is making all of the difference.”

Changes in Cenlar’s Approach to the Veterans Affairs Partial Claim Program

As we shared in May, Cenlar has been following the VA process and guidelines for partial claim filing and reimbursement. The VA initially advised that servicers should not advance funds until the VA has certified the claim. Unfortunately, the VA’s certification process continues to be delayed from 90 to 120 days. The VA delays impede the ability to finalize the loss mitigation process but the VA does not object to the servicer advance of the partial claim amount.

The VA certification process takes place after the servicer has received the signed documents from the homeowner and files the partial claim with the VA office. Going forward, Cenlar will advance the claim funds using the client’s GL until the claim is verified by the VA. We intend to advance on all VA Stand-Alone Partial Claims not yet certified but that have executed all required documents by the end of June.

Should you have homeowners with VA loans that have completed the document execution process for the partial claim program that meet the above criteria, your June invoice and those thereafter will reflect this advance until the VA certifies the backlog of loans. This activity will be on your monthly bill in third-party corporate advances. When the VA catches up, Cenlar will credit your account accordingly.

In July we will finalize the remaining uncertified and closed VA Partial Claim/ Modification loans by advancing the funds for the partial claim and requesting pool buyout (if appropriate). This will allow us to set the new modified loan terms up and begin to appropriately service the loan to the terms of the new modification. In some cases these loans have closed in Q1 of 2022 and have not become fully contractually current. VA has specifically requested we do not record any executed uncertified partial claims/mortgages.

Please keep in mind this action is in response to VA’s backlog of certifying the partial claims that we have timely filed on your behalf.

If you have any questions or concerns please reach out to your client manager.

ICYMI: Listen to our June 23 Update with Cenlar Leadership

Thanks to all of you who were able to attend our June 23 call with Cenlar leadership. We appreciate the opportunity to continue to talk with you about the investments we’re making in important areas of our business.

If you missed the call, an audio recording of it is available in the About Section on CenAccess, saved as Update with Cenlar Leadership Call Recording.mp3.

Please note that the presentation and recording are subject to the confidentiality provisions of your respective subservicing agreement.

We look forward to sharing more as we go forward, and greatly appreciate your partnership. If you have any questions or feedback, please reach out to your client manager.

 

Independence Day Observance

In observance of Independence Day, Cenlar will be closed on Monday, July 4, 2022. Any files received on Monday, July 4 will be processed the night of Tuesday, July 5. Output will be available the morning of Wednesday, July 6.