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Home Equity Collections And Optimization

Desired Capabilities

  • Business Alignment
  • Process Management and Development
  • Data Analytics

The Situation

In preparation for the imminent recession, Home Equity Collections teams at financial services organizations are recognizing a need for more proactive policies and capabilities to prevent charge-offs.

The Challenge

While headwinds are likely to grow stronger, Home Equity Collections departments have noticed a decrease in customers’ ability to remain current with their Home Equity payment obligations in the last year. Adding to this challenge are loss mitigation assistance gaps that limit customer eligibility (many are available only upon customer-initiated request) and the degree of assistance they may be able to provide. And for some banking institutions, reactive and marginally effective strategies only serve to increase the frequency and severity of resulting account charge-offs. In our case, the client had also recently uncovered a set of historic compliance failures requiring rapid risk mitigation, remediation and strategic process redesign.

Meaningful Outcomes

  • Implemented robust charge-off, recovery and capacity forecasting models with event trigger alerts and management reporting
  • Identified high-opportunity customer targets in the specified local market 
  • Generated 900 additional leads for future acquisition activities in the local market
  • Created a marketing campaign and data analytics model for the client to leverage for future sites

Spinnaker really helped us rapidly redesign our models, processes and assistance options to help many more customers and our shareholders at the same time. OPERATIONS EXECUTIVE, FORTUNE 100 FINANCIAL SERVICES COMPANY

Our Approach

Following a preliminary assessment in which our team met with home equity executives, front-line home equity associates, loss forecasting modelers, servicing platform (the system connecting back-end functions with user experience) administrators, experts in the foreclosure space, and compliance and legal counsel, we found several short-term and strategic opportunities as well as compliance gaps spanning people, process management, programs, IT and third party usage.

From there, the engagement team built robust charge-off and recovery forecasting models that allowed for ongoing performance monitoring and the ability to quantify a set of recommended process and capability improvement recommendations. Aside from creating a consistent tool for decisioning, these models helped validate the performance and compliance of existing assistance programs, further limiting the organization’s risk.

Once the base analytical models were in place, we focused on fortifying the core loss mitigation, foreclosure and recovery operations by ensuring debt assistance programs were more proactively offered, available to more customers, and more meaningful in terms of the payment support they provided. From there, our focus shifted to redesign and implementation of new strategies and operational capabilities.

We began by establishing a dedicated outbound loss mitigation team with a specific HELOC skillset (historically, the mitigation team also serviced Card, Auto and DDA collections). Next, our team launched a net present value (NPV) decision tool that could recommend a program offer (modification, settlement, deferral or foreclosure) based on specific customer criteria. We then recalibrated various charge-off policies to align with updated recovery forecasts.

We also established and refined several controls, solidifying the monitoring system to ensure compliance with Unfair, Deceptive or Abusive Acts and Practices (UDAAP) legislation, the Fair Debt Collections Practices Act (FDCPA) and the Truth in Lending Act (TILA). Lastly, we launched a set of dynamic management reports to ensure comprehensive understanding of performance and proactive identification of possible delinquency trends and capacity issues.

Once our process management consultant team solved for the known elements of the engagement, leveraging insights collected through our assessment and subsequent implementation, we were able to support a client- facing remediation exercise to help build trust and further fortify newly adopted policies and procedures.