This is the seventh Servicing Symposium—how have pressures on servicers changed over the years?
There have been two sets of pressures: regulatory and internal market pressures. From the regulatory standpoint, the advent of Dodd–Frank and Regulation AB II required servicers to provide more granular reports to federal regulatory bodies for longer periods of time, which put pressure on servicing personnel and systems to keep up with ever-increasing data streams and maintain detailed records. Internal market pressures are requiring servicers to execute their businesses faster, better and cheaper with a general reduction in force and staffing. Profit margins have decreased dramatically over the last several years, forcing servicers to adopt greater automation to increase volume due to very thin profit margins.
What is new this year?
We see servicers having to process unusually high volumes of data, so we are taking a look at the technologies, methods and processes that servicers are using, paying particular attention to the legal and economic challenges that servicers may face as a result. Customer service is also a focus this year, and we will have a meaningful discussion about what that means to people and how to improve.
Servicers are generally faced with regulatory hurdles. What are the great hurdles facing servicers now?
Servicers (as with all market participants) are faced with whatever headwinds are blowing at the market the hardest. Clearly, servicers are dealing with the changes that risk retention will present once fully implemented. We want to examine just what the impact may be on the servicers, from reporting obligations to economic pressures, if the costs to CMBS borrowers rise.
Why is special servicing back in the forefront of the symposium?
As we approach 10 years after 2007 (considered by many to be the last “boom year”), billions of dollars of refinancing is projected to be coming due. With new lending standards, risk retention and the like, there may not be enough new liquidity to meet the needs of borrowers looking to refinance. If so, then special servicers will need to step in and work with assets in maturity default. We want to examine and take a hard look at where special servicing is potentially going to be in 2017 and the next few years.