During recessions, mortgage servicers experience rising delinquencies as homeowners experience financial hardship. Higher delinquency rates mean a significant rise in compliance workloads. About one-third of all mortgage servicing regulations apply specifically to delinquent loans, so even a moderate recession can dramatically increase compliance responsibilities.
Normally, mortgage servicers handle compliance through some manual reporting and lots of manual audits. This works fine when delinquency rates are low. But when delinquencies spike during downturns, manual processes quickly become overwhelming, costly, and error-prone. The increased compliance demands lead to higher labor costs at a time when mortgage servicers can least afford additional expenses.
This context clarifies why the return on investment (ROI) for compliance automation projects swells during recessions. Automation, like MESH Auditor, provides leverage, checking every rule every day against every loan regardless of how many there are. And MESH Auditor does it at low cost, without integration complexities and without sensitive borrower information.
Here’s why automation makes economic sense, especially in a downturn:
- Cost Savings: Automation significantly reduces dependence on costly manual labor, saving money as compliance workloads grow.
- Efficiency Boost: Automated platforms swiftly and accurately handle compliance across an entire loan portfolio, greatly reducing the chance of expensive compliance mistakes and regulatory fines.
- Better Use of Resources: Automation helps compliance teams spend more time fixing problems rather than just finding them, improving productivity under pressure.
Research consistently shows that companies turn to automation during downturns, especially to replace routine, labor-intensive tasks (see studies by Hershbein, Kahn, and Holzer (2018) and Acemoglu and Restrepo (2019) and this article by UDig).
Mortgage servicers who adopt compliance automation ahead of a recession not only stay compliant but also achieve significant economic advantages (Knesl (2023) through increased efficiency and lower costs.
To learn more about maximizing your compliance automation ROI with MESH Auditor, watch our 99-second video and schedule a demo at www.mesh-platform.com.