Mortgage servicing has faced some unique challenges over the years mainly because its processes are dictated by state statute as well as federal rules or standards. To scale up and ensure compliance with all the stipulated rules and regulations, many servicers are choosing to adopt uniform procedures across all states. But several servicers lack complete clarity and the understanding of how it impacts the bottom line and timelines. Several servicers get caught up in providing excellent customer service, adhering to regulatory requirements and meeting investor expectations. However, while doing so, in several instances, mortgage operations become overly cumbersome and inefficient.
Peculiar challenges in Lien Release Processing:
In the case of lien release processing, the states have different rules for ‘who can release the loan’, ‘the time frame’ or ‘the step-by-step process to do it’. There is one consensus though, once loans are paid off by the borrowers, lien releases must be processed by servicers within 30-90 days with the county in which the mortgage or deed of trust is recorded.
However, in case the assignments or beneficiary information is inaccurate or documents are missing, there is a high chance of lien releases being rejected by the county. According to Ernst Information Services, ‘over 10,000,000 documents are rejected by County Recorders creating over $500,000,000 in losses that are absorbed by the mortgage industry each year.’ This might very easily lead to an approximate $50 cost for every rejection.
The statutes governing lien release processing range from the requirement to prepare, record and send a copy of the recorded document to the borrower within a certain amount of time from payoff to requiring the borrower to formally request the release.
Some of the varying procedures we have seen servicers follow over the years are:
- In some instances, a release or the Original Note is provided with the expectation that the borrower would take the Note or release to the county to effect a lien release.
- Some statutes allow you to charge the borrower for recording and preparation of the lien release, while others cap the fee or do not address it.
- Some servicers order the collateral, image the entire file, mark the documents ‘Paid-in-Full’ and send the original documents to the borrower in all states, while others do so in a limited number of states.
- Whereas, some do not send the collateral taking the stance that most states who still refer to the original documents concerning lien release are states that require the borrower to formally request the release or give the option to send the release or the note, not both. These servicers instead send a copy of the recorded release to all the borrowers which reduces customer and third-party inquiries.
These varying procedures might be the cause of timeline delays and additional costs for lien releases. To optimize lien release processing, and to explore cost-saving opportunities, we believe that servicers need to revisit their lien release processes.
Revisiting and changing some of the procedures might help the industry realize cost-saving opportunities and lead to enhanced customer experience.
Based on our experience with bank and non-bank servicers, our team at Visionet has recently published a whitepaper on lien release processing. It highlights the intricacies in lien release processing and provides potential cost-saving opportunities while ensuring compliance. You can download the whitepaper here to read more.
Many servicers suffer from regulatory fatigue resulting in reticence to adopt new technologies that would ensure efficiency gains and emergence from the layering and band-aid approach to processing constructed in the heat of the AG settlement and Consent Order (s).
Caught at the nexus of providing excellent customer service, adhering to regulatory requirements and meeting investor expectations, mortgage operations leaders must re-evaluate current operations and embrace automation to meet and exceed the expectation of all its stakeholders.