By Mike Ponce, Vice President, Data Services
Service Level Agreements (SLAs) are a vital aspect of business relationships, providing a straightforward way to measure performance. In the mortgage servicing industry, particularly in property taxes and escrow accounts, the performance of a vendor’s SLA can have significant consequences. Failures in this area can negatively impact the servicer’s bottom line, damage relationships with homeowners, and, in extreme cases, put the property at risk. Therefore, servicing managers closely monitor SLA metrics.
However, not all SLA metrics are equally important. Some can be manipulated to mask substandard performance, while others may only reflect past results rather than drive improvements. To ensure SLAs align with business goals, servicers should ask their tax providers five critical questions about how SLA metrics are measured and reported.
1. Is There Full Transparency, and Are Controllable Mistakes Categorized Correctly?
In tax servicing, mistakes and missed payments are categorized as either controllable or uncontrollable. For example:- Controllable mistakes: An inaccurate due date or a missed callback (e.g., failing to follow up on a confirmed refund amount within two days).
- Uncontrollable mistakes: Issues like a hold placed by a bank.
- Detailed, loan-level SLA reporting.
- Accurate categorization of controllable errors to ensure full accountability.
2. What Is the Tax Provider’s Tolerance for “Standard Deviation”?
Every service has a small percentage of misses, known as standard deviation. However, a provider’s tolerance for these misses can significantly affect a client’s portfolio. For example, a provider relying on large-scale automation might accept a 0.02% miss rate as normal, but even this small percentage can impact a servicer’s portfolio. Servicers should ask:- How are SLA calculations performed, and are small misses overlooked?
- Is the provider transparent about their tolerance for deviations?
- Are these tolerances aligned with the client’s expectations?
3. Are SLA Metrics Just a Report Card, or Do They Drive Operational Accountability?
For most tax providers, SLA metrics are historical reports—monthly, quarterly, or annual summaries of performance. However, SLAs should do more than reflect past results; they should drive operational accountability. At LERETA, we go beyond reporting metrics. We focus on:- Root cause analysis: Identifying the reasons behind issues.
- Remediation: Implementing long-term solutions to prevent recurrence.
- Comprehensive tracking: Monitoring every aspect of every loan, including non-standard loans like chattel and single-family investor loans, not just automation rates.
4. Are Leading Indicators Given Equal Weight as Final Metrics Reporting?
SLAs typically focus on final outcomes, such as whether taxes were paid on time and whether the correct amounts were paid. However, leading indicators—early signals of potential issues—are equally critical. Key leading indicators include:- Understanding the full portfolio, including exceptions.
- Knowing due dates and requirements from over 17,000 taxing agencies.
- Staying up-to-date on local tax-related legislative changes.
- Accurate tax line setup at the outset.
- Ongoing monitoring of leading indicators.
5. Is Customer Support Available to Address SLA Issues?
Responsive customer support is essential for addressing SLA-related challenges. Some servicers that outsource tax services may find that only high-tier clients receive dedicated account managers, leaving others without adequate assistance. At LERETA, we ensure:- Universal access: Every client, regardless of portfolio size, has dedicated customer support.
- Proactive issue resolution: Support aligns with our focus on transparency and accountability.
- High performance: Maintaining a consistent 98% SLA performance level.
Key Takeaways
SLAs in reverse mortgage tax servicing are not just about reporting—they’re a tool for operational excellence. Servicers should prioritize:- Transparency in reporting and issue categorization.
- Accountability through root cause analysis and remediation.
- Proactive management by monitoring leading indicators.