By Danny Byrnes, VP Sales & Marketing, Nationwide Title Clearing Inc.
The key word here is partner. You want to be sure to engage a company that you feel confident will work with you to meet your needs and go that extra mile for you. Before embarking on a search for a new vendor partner, it is recommended that you create a list of criteria that any prospective vendor must meet in order to be considered. The following criteria can be considered best practices for establishing such a partnership.
1) Demand a specific commitment to accuracy and compliance. As mentioned above, the highest concern among mortgage servicers is typically compliance. This boils down to the accuracy of the database containing the statutory deadlines, requirements and document format guidelines for all recording jurisdictions nationwide. An effective way to gauge preparer performance is by monitoring the county document rejection percentage. This should be well below 3%. But beyond that, the vendor must address the proactive as well as the reactive by maintaining constant proactive contact with recorders and working with them to perfect the submission process.
Regardless of how well a potential lien release partner performs, a strong indemnity policy is a must. This coverage protects the mortgage servicer by putting any potential liabilities springing from non-performance or noncompliance on the shoulders of the vendor hired to perform the task. In the lien release market this is an indication of the vendor’s confidence in its own ability to provide timely and accurate lien releases.
This is the best way to avoid problems that could potentially lead to a class action in the courts. While a good SLA will indemnify the servicer in the event of a problem, you need more than that. Once a class action is certified, the public relations damage to the servicer has already been done. A commitment to accuracy and compliance is your best defense against this risk.
2) Demand a commitment to fulfilling the SLA. Most vendors typically agree to meet your service level agreement (SLA) requirements. Most do, but there always exists the possibility that SLA timelines will be compromised. When the completion of the work is dependent upon outside parties, service level agreements can become hard promises to keep.
If the outsourcer is competent and accurate, maintaining service level agreements should never be a problem. With that said, it is important to be leery of outsourcers that promise service level agreements that sound too good to be true; as with most things, they usually are. If an outsourcer seems to be promising a service level that’s extremely expedient, look at their rejection percentage. If it is above 3 percent, they may be making errors due to rushed and improperly managed work.
3) Require a strong focus on the lien release business. Most good vendors in this market segment will find that the infrastructure they maintain is suitable for a range of services. Regardless of which services the vendor offers, a good lien release partner will demonstrate a strong focus on lien releases.
A dedicated infrastructure not only means providing a sufficient number of full time employees, but that the complement is filled with knowledgeable staff. If the company’s core competencies are focused on lien releases, then they should have no problem staffing up quickly to meet the servicer’s volume demands with an experienced team.
Some outsourcing companies make the mistake of redeploying human resources when they perceive higher profit potential in another area. A quality outsourcing partner will have a dedicated staff seasoned in handling lien releases.
One measure of a company’s expertise has to do with previous experience with the loans it later releases. If the company also offers additional services, such as collateral file audits, assignments or MERS services, information about the loan may already be on file within the company, making it far less likely that an error will occur when the lien is finally released. NTC, for instance, has released 23 million liens, but we have touched many more loans with our other various services. By the time the lien is released, it’s likely that NTC has touched that loan six or seven times.
4) Require the vendor to conform to your business. One should not confuse a proficiency in a certain process with a standard for doing business for the servicing company as a whole. Too often, outsourcers will put undue demands on a servicing shop, disguising those demands as required conditions necessary to achieve success. Experience indicates that the surest path to success lies in changing as little as possible about the servicer’s infrastructure while delivering a high quality service that meets a realistic service level agreement. The best results are achieved when both the servicer and the vendor can share best practices that make both more effective.
In most cases, servicers will find that to be most effective, the vendor should develop a custom workflow to interface smoothly with the servicer’s team. The best vendors are adept at doing this.
This means that an effective lien release partner must be willing to customize everything about its service in order to fit well with the way the servicer does business.
5) Require a commitment to providing adequate technology. Successful outsourcing arrangements today are built on solid technology that provides seamless integration with appropriate data security and transparency from the first time data is touched until the process is completed. While there are many ways to judge a technology platform, there are certain elements that must be included in order to create an effective outsourcing partnership.
Full integration with a new vendor should take no more than 30 days. Reporting and auditing should be built in, real time and accessible remotely. Workflow should be completely automated and the outsource partner should be able to quickly locate any release in the pipeline at any time. Because of federal regulation, these technologies should be certified by a third party. See more below.
6) Require third party validation of vendor claims. An important part of the due diligence process for any outsourcing initiative involves seeking out third party endorsements of the prospective partner.
Most firms will have a set of business references handy. In the case of the lien release business, a good partner will also have paperwork available to establish its successful completion of third party audits and reviews.
The best vendors have invested a significant amount of money meeting these requirements. The audit costs required to operate as a service provider to mortgage banking and financial service companies have nearly tripled in the past few years. In today’s marketplace your vendor must be SSAE-16 SOC-I certified (previously called a SAS-70 Type II audit), and have regular ISO audits, reviewed financials, disaster recovery, business continuity plans, HR audits, and security audits. All of which should be readily available for your review.
7) Well-established training for every employee involved in the process Make any vendor responding to your RFP demonstrate their process for training internal staff. The need for near constant training and employee testing cannot be overestimated. With regulations changing all the time, any vendor partner the servicer chooses must have a special department that is dedicated to constant training and development.
8) Demand Transparency. Arguably the most important point in the use of any vendor is their transparency. Will that vendor act as if they are a part of your shop, seemingly “working right down the hall” from you, or will communication and interaction be few and far between? Will they show you everything and make it easy to manage ongoing volumes, or will they attempt to make you conform to their system, causing possible data gaps? Communication and transparency shouldn’t be a challenge. It should be free-flowing and flexible to adapt to your needs.
In Conclusion
The foundation for success with any outsourcing initiative is built by establishing the basis for a strong partnership from the very beginning and tracking the right metrics throughout the engagement.
A well-written contract based on a clearly scoped project is the basis for a good partnership. However, no contract, regardless of the service level agreements it contains, will force a vendor to meet the company’s real needs. Making sure that the new vendor satisfies the criteria above will do more than any contract to establish a good working relationship. As they say in Hollywood, casting is 90 percent of success.
Even so, a good set of written contracts that specify how the work is to be completed and within what time frame is a requirement for doing business. Good vendors can supply sample agreements that have served well with other clients in the industry.
In the lien release business, there is only one metric that really matters: Out of Compliance (OOC) Percentage. Specifically, this is the number of lien releases not filed in a timely, accurate and compliant manner. In this business, success can be clearly defined. There is no gray area in which to hide. Demand metrics and reports that provide true transparency. Insist on selecting a company that runs their business on a model of accuracy and compliance above all else.
About the author Danny Byrnes serves as Vice President of Sales and Marketing for Nationwide Title Clearing, Inc., the nation’s largest provider of lien release services.
