By Mike Ponce, Vice President, Data Services
Service Level Agreements (SLAs) are a critical component in most business relationships, because they are an easy way to measure performance. In the mortgage servicing industry, and specifically with property taxes and escrow accounts, a vendor’s SLA performance can take on greater significance, given that failures can impact the servicer’s bottom line, damage its relationships with homeowners, and, even in extreme cases, put a property at risk. So servicing managers are keenly focused on SLA metrics.
But are some SLA metrics more important than others? Are some metrics easily “gamed” to make substandard performance look better? And finally, are SLAs merely a backward-looking report card, and a promise to do better, or are a critical diagnostic tool for identifying root causes that need to be addressed?
With this in mind, here are five questions servicers should ask their tax provider to ensure SLA metrics are measured and reported in ways that support their goals.
Is there full transparency, and are “controllable” mistakes being categorized as “uncontrollable”?
Mistakes and missed payments in tax servicing are categorized in one of two ways: those that are controllable, (for example, having an inaccurate agency due date in place); and uncontrollable (for example, if a bank requires a hold on a payment). Here’s where SLA reporting can deliver apples to oranges comparisons with controllable issues being identified as uncontrollable. That’s one example of the important of transparency in reporting.
Effective evaluation of SLA performance cannot occur without full and complete loan-level transparency. For instance, if an agency is contacted to confirm a refund amount and they say to call back in two days, meeting that call-back goal should be considered an SLA metric that is measured, as it is with LERETA. If the call doesn’t occur, it becomes controllable. Other providers might indicate a call back as a next step but if the call doesn’t occur, label the task as uncontrollable. There should be full accountability for that small task and full transparency if it doesn’t occur within the set timeframe.
Servicers should ask their tax providers to include full loan-level detail in SLA reporting so that each issue can be traced back to its origin and there is full accountability for even small tasks.
What is the tax provider’s tolerance for “Standard Deviation”?
There will always be some level of standard deviation — a certain percentage of misses that will occur. But what is the tax provider’s definition and tolerance for these standard deviations? If a provider is more focused on large-scale enterprise business that’s driven primarily by automation — putting speed above accuracy — writing off a 0.02% slip in SLA metrics may be business as usual. But try justifying that to a client whose portfolio is affected. Though small, it’s still a miss and should require attention and remediation. This gets back to the importance of transparency, making sure it’s abundantly clear how SLA calculations are made and not tolerating higher levels of standard deviation simply because it’s the path of least resistance.
Are SLA metrics merely a reporting function after the fact, or do they actually drive operational accountability?
Historically and for most tax providers, SLA metrics have been a reporting function that occurs once a month, once a quarter or even as infrequently as once a year during business reviews. They deliver performance reports that present the facts without accompanying initiatives or next steps to address fundamental cause-and-effect with missed SLAs. At LERETA, we’ve turned SLA reporting on its head, and rather than simply report on the metrics, we have a process in place for remediation to get to the root cause of the problem so that long-term solutions can be implemented. This deep dive may take longer on the front end, but it pays off on the back end with immediate remediation that mitigates future problems.
New technology and automation have made tax servicing much more efficient. But large-scale automation without a process in place for handling exceptions will, by definition, deliver inconsistent results. Hitting automation goals shouldn’t be the point. LERETA doesn’t just measure whether we achieved the highest automation rate possible. We measure every aspect of every loan’s life cycle, including non-standard loans like chattel and single-family investor loans. Reducing metrics to focus on automation markers will miss those loans that fall outside the standard tax model.
Are leading indicators given as much weight as final metrics reporting?
In the same vein as getting to the root of an issue to prevent it from occurring again, paying close attention to leading indicators that can suggest a potential problem before it occurs is another way SLA metrics can drive operational accountability. Obviously for tax providers, the overarching SLA metrics servicers are focused on are: were the taxes paid on time and were the correct amounts paid? But behind those two big measurement goals lie hundreds of other steps that influence the ability to meet these goals. For example, understanding the full portfolio, including exceptions; knowing the requirements and due dates from the more than 17,000 taxing agencies; identifying open items (i.e. missing a legal description); and staying current on local tax-related legislative rules are all leading indicators. Setting up tax lines correctly on the front end and monitoring these indicators along the way mitigates potential problems by flagging them before they occur. Putting equal weight on front-end set up and weekly monitoring of these leading indicators should be a priority in SLA measurement.
Is customer support in place to work through SLA issues?
Some servicers that outsource their tax business may discover capable and responsive customer support is elusive. While the small group of top-tier clients may have account managers, what about the thousands of other clients that have no resource to turn to when they have a question or need assistance. At LERETA, every client gets dedicated customer support, regardless of their size or the size of their portfolio. This customer-centric approach fits hand-in-glove with how we deliver SLA metrics: being fully transparent; taking the time to actually fix problems rather than just report on them; having a very low tolerance for mistakes; and most importantly, recognizing that SLA metrics are not an exercise in covering up issues, but letting the process drive operational excellence so they aren’t any issues to cover up.
Perhaps that’s why LERETA SLAs achieve a consistent 98% and above performance level.