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Servicer Evaluation: RoundPoint Mortgage Servicing LLC

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Servicer Evaluation: RoundPoint Mortgage Servicing LLC

Ranking overview
Subrankings
Servicing category Overall ranking Management and organization Loan administration Ranking outlook
Residential mortgage loan primary servicer ABOVE AVERAGE ABOVE AVERAGE ABOVE AVERAGE Stable
Financial position
SUFFICIENT

Rationale

S&P Global Ratings' ranking on RoundPoint Mortgage Servicing LLC (RoundPoint) is ABOVE AVERAGE as a residential mortgage loan primary servicer. On June 28, 2023, we affirmed the rankings (see "RoundPoint Mortgage Servicing LLC ABOVE AVERAGE Residential Mortgage Loan Primary Servicing Ranking Affirmed", June 28, 2023). The ranking outlook is stable.

Our ranking reflects RoundPoint's:

  • Executive team of experienced leaders with tenured servicing management, who have been with RoundPoint through changes in ownership;
  • Satisfactory training regimen;
  • Capable systems and technology environment, which supports its primary servicing responsibilities;
  • Continued focus on process enhancement and automation to increase efficiency, including the creation of a dedicated robotics development team;
  • Investment in the internal controls framework to build out compliance and quality control, although it is still reliant on Freedom Mortgage (Freedom) for internal audit and regulatory change management support;
  • Reduced staffing in vendor management and transitioning of responsibility of some of its oversight functions to the line of business; and
  • Servicing metrics that are generally in line with peers, albeit with higher portfolio delinquency levels and non-reimbursable tax penalties.

Since our prior review (see "Servicer Evaluation: RoundPoint Mortgage Servicing Corp.," published Aug. 11, 2021), certain changes and/or developments have occurred:

  • RoundPoint completed a name change to RoundPoint Mortgage Servicing LLC from RoundPoint Mortgage Servicing Corp.
  • Freedom entered into a stock purchase agreement to sell RoundPoint to Matrix Financial Services, a subsidiary of Two Harbors Investment;
  • RoundPoint exited its Guadalajara, Mexico, call center and closed its Dallas office;
  • The company modified its new hire training program to reduce up-front classroom training;
  • It created a leadership mentor program;
  • RoundPoint created a robotic processes development and monitoring team;
  • The head of internal audit left the company and was not replaced, and the role continues to be managed by Freedom;
  • The compliance function was realigned under the legal department, and two new vice president roles were created to support corporate and servicing compliance;
  • RoundPoint reduced staffing in vendor management and transitioned responsibility of some oversight functions to the line of business;
  • The company implemented Black Knight's LoanSphere Loan Boarding system;
  • It added the MSP payment processing workstation, which allows borrowers to remit payments on varying dates or from multiple bank accounts;
  • It built out automation to support processes performed by the escrow department, such as a loss draft calculator, to increase efficiency and scalability; and
  • RoundPoint transitioned to Black Knight Financial Services' Loss Mitigation solution.

The ranking outlook is stable. With the announcement of the sale of the company, there has been some separation of responsibilities from Freedom; however, there continues to be some functions, including internal audit, which are managed by Freedom. Our outlook is based on the expectation that RoundPoint's business model will remain the same. Similarly, when the sale is finalized, the failure for RoundPoint to have a fully functioning internal audit program could result in a ranking change. We will continue to monitor RoundPoint's ability to adapt to its new business model along with the effectiveness of its internal controls and servicing metrics.

In addition to conducting an on-site meeting with servicing management, our review includes current and historical Servicer Evaluation Analytical Methodology data through December 31, 2022, as well as other supporting documentation provided by the company.

Profile

Servicer profile
Servicer name RoundPoint Mortgage Servicing LLC.
Primary servicing location Fort Mill, S.C.
Parent holding company Freedom Mortgage Corp.
Servicer affiliates Freedom Mortgage Corp.
Loan servicing system MSP

RoundPoint, founded in 2007, was acquired by Freedom in August 2020 and now operates as a subsidiary of Freedom. On August 2, 2022, Freedom Mortgage entered into a stock purchase agreement to sell RoundPoint to Matrix Financial Services, a subsidiary of Two Harbors Investment. The sale is pending state and agency final approval but is expected to be completed by the end of 2023.

RoundPoint is a fully licensed servicer in all 50 states, the District of Columbia, and the U.S. Virgin Islands. RoundPoint is an approved Fannie Mae and Freddie Mac seller servicer. In late 2022, Matrix engaged RoundPoint as a subservicer and began transferring loans to the RoundPoint platform. RoundPoint expects to have the total portfolio, approximately 800,000 loans, transferred by February 2024. While there has been fluctuation in the portfolio (see Table 1) this was a result of the transfer of loans to Freedom.

RoundPoint is located in Fort Mill, S.C. It also uses vendor sites in India to augment staff for support functions. Since our previous review, RoundPoint closed its Dallas office and exited its Guadalajara site which had been one of its call centers and now manages all calls onshore.

As of December 2022, the portfolio did not exhibit state concentration risk (see Table 2).

The Matrix portfolio is made up primarily of performing Fannie Mae and Freddie Mac loans, similar to RoundPoint's current investor dispersion (see Table 3).

Table 1

Portfolio volume
Prime
Units (no.) Volume (mil. $)
Dec. 31, 2022 236,120 61,066.27
Dec. 31, 2021 270,210 53,446.05
Dec. 31, 2020 243,951 46,682.50
Dec. 31, 2019 414,237 84,523.68
Dec. 31, 2018 406,349 84,070

Table 2

Portfolio distribution by state
Prime
Top five states Units (%) Unpaid principal balance (%)
California 16.71 23.72
Texas 6.50 5.82
Tennessee 5.61 3.40
Florida 5.53 4.47
Washington 4.30 4.93
Other 61.35 57.66
Total 100.00 100.00

Table 3

Portfolio breakdown by investor
Investor Units (%)
Fannie Mae 43.31
Freddie Mac 48.89
Ginnie Mae 0.00
Mortgage-backed securities investor 0.00
Portfolio 0.00
Other investor 7.80
Total 100.00

Management And Organization

The management and organization subranking is ABOVE AVERAGE.

Organizational structure, staff, and turnover

RoundPoint's executive leadership is headed by its CEO who has four direct reports: the servicing channel executive, SVP of accounting, chief administrative officer, and chief operating officer. The servicing channel executive has nine direct reports managing servicing operations while the chief administrative officer is responsible for the support functions of credit risk, vendor management, legal and compliance, talent acquisition, and learning and development.

Senior management and staff turnover rates reported for the second half of 2022 were very high at 34.5% and 60% respectively. RoundPoint attributed the increase to staff unease about prior layoffs. With the announcement of the sale to Matrix, management feels the turnover is stemmed and reported a year to date overall turnover rate through April 2023 of 9.27%, in line with peers.

RoundPoint employs a staffing model utilizing portfolio forecasts, loan transfers, and delinquency rates to anticipate staff level requirements ahead of the need. The model is run twice per month and contemplates both onshore and offshore staff. The staffing model is adjusted as automation is introduced. It has also adjusted the accounts per employee target as the portfolio has shifted to one primarily comprised of Fannie Mae and Freddie Mac performing loans.

Training

RoundPoint provides its management and staff with a diversified array of ongoing training programs. A learning management system tracks training courses assigned, outstanding, and completed by employees. The department structure was modified since our last review to have one trainer in the learning and development team with two trainers in the call center reporting to the SVP customer care with dotted line reporting to the VP learning and development.

In addition to the organizational change, new hire classroom training was condensed from a two-week program to a three-day program focused on basic information before new employees are sent to their respective departments for on-the-job training and completion of courses online instead of in a classroom. In conjunction with this change, training courses were revamped so they could be delivered online.

RoundPoint kicked off a leadership mentor program in May 2023 where participants will be paired with a SVP as a mentor for six months. RoundPoint continues its quarterly workshops for employee professional development.

Systems and technology

We believe RoundPoint operates in a sufficiently automated environment using industry recognized systems to support its servicing platform. RoundPoint maintains a disaster recovery and business continuity plan, including response procedures to address operational disruption because of a pandemic event.

Since our last review, RoundPoint created a dedicated team of five employees to create, implement, monitor, and support robotic processes. Monitoring tools and reports identify errors which are sent to the business to address.

Servicing system applications 

The following systems support servicing operations:

Table 4

System Purpose
Black Knight MSP Servicing system
Black Knight LoanSphere Default Default and bankruptcy workflow
Black Knight LoanSphere Invoicing Invoice approval workflow
e360 Inc CMAX Claims filing tool
Black Knight Loss Mitigation Loss mitigation workflow
Black Knight Loan Boarding Loan boarding application
Five9 IVR and dialer
Verint Workforce management tool
AIQ OCR and document repository

While we noted in our prior review that RoundPoint planned servicing updates to its servicing portal, it instead implemented Black Knight's white label customer solution, Servicing Digital.

Business continuity and disaster recovery 

RoundPoint maintains sound business continuity and disaster recovery plans. Highlights and controls of the process include that:

  • Disaster recovery exercises are held annually with the most recent tabletop exercise performed on Dec. 12, 2022.
  • In the event of a disaster, RoundPoint utilizes an alternate servicing site, work-from-home capabilities, or offsite data centers. It also contracts with a recovery solutions provider, which will provide emergency workstations within 48 hours of request.
  • Business recovery plans are reviewed and tested annually.
  • The company uses cold storage and replication for backing up its data which is tested monthly.
  • Critical systems have 24-hour recovery point and recovery time objectives.

Cybersecurity 

RoundPoint's information security framework was built utilizing the Federal Financial Institutes Examination Council recommendations as a guidepost. Tools and practices used by RoundPoint for data security include:

  • A third-party security information and event management program that monitors internal and external activity;
  • Firewall, data loss prevention, web filtering, and antivirus technologies;
  • Use of two factor authentication;
  • Monthly phishing simulation campaigns;
  • Annual internal information security risk assessments that measure the effectiveness of the controls;
  • By policy, annual third-party penetration testing, that was last performed on December 21, 2022 and for which there were no material issues identified; and
  • Information security awareness training
Internal controls

RoundPoint relies on three lines of defense within its control environment to detect risk and provide necessary oversight. RoundPoint uses an internal audit management system, quality control testing software, and a proprietary governance, risk, and compliance (GRC) tool to manage enterprise audit, quality control, and compliance findings and action items. Since our last review, the RoundPoint head of internal audit, who had recently joined the company, left RoundPoint and was not replaced. RoundPoint's internal control framework continues to be supported by Freedom through a shared servicing agreement. While RoundPoint has its own risk and compliance committees, with the pending sale to Matrix and separation from Freedom, the lack of fully separate internal audit and regulatory change management functions is a risk.

Policies and procedures 

We believe RoundPoint demonstrates proper controls and a proper structure for developing, documenting, updating, and disseminating its mortgage servicing policies and procedures to staff. The compliance department is responsible for the administration of policies and procedures documentation. When procedure changes are required, the revised procedure document will undergo a formal change control process to ensure all appropriate approvals are received. The business units work with compliance to ensure regulatory standards are met. Each procedure document is reviewed annually to ensure relevance for publication and to assess if any revisions are needed to the content.

Quality assurance and call monitoring 

RoundPoint's first line of defense is comprised of intradepartmental quality assurance (QA) processes that evaluate risks and controls within operations. Larger departments-such as loss mitigation, default, and loan boarding-have segmented QA teams in their departments, whereas QA reviews are completed by a supervisor or senior staff in smaller departments. QA performs in-line testing rather than post-transaction testing to identify and correct issues at the time the process is performed. Standard KPI reporting includes QA scores for higher risk processes.

Supervisors in the business units monitor five calls per customer service, collection, and loss mitigation agent per month, and QC monitors an additional five. An agent scorecard assesses agents as part of their performance management. The QC review focuses on risk-based items. QC also monitors chats via screen prints stored in the imaging system.

Compliance and quality control 

The compliance team was realigned under the RoundPoint chief legal officer since our prior review. In addition, two new vice presidents were hired, one as VP corporate compliance and one as VP of servicing compliance. Even with these changes, RoundPoint compliance relies on Freedom for identification of regulatory changes. Once identified, compliance is responsible for working with the business units to operationalize the regulatory change management items identified by Freedom. The regulatory change control process, which manages both regulatory and investor changes, includes weekly meetings held with the business units to review the status of the changes. RoundPoint's compliance team works with the business units to track and monitor remediation plans, using a proprietary web-based change management application, and reviews and approves all changes to business processes, internal controls, and policies and procedures.

The servicing QC area reviews the servicing and default operations on a risk-based schedule, and performs quarterly targeted reviews, to protect the company against the risk of loss from noncompliance with company, investor, and regulatory guidelines. Since our previous review, an AVP of QC position was added to the organizational structure. The team also includes a team lead, four staff members for QC, and an additional staff member for QA call monitoring. All staff are crossed trained on product types. Compliance testing software is used for test creation, sampling, and test result documentation. Findings are classified as informational (low risk), significant (moderate risk), critical (high risk), or material (material risk). Executive summary reporting is published, and meetings are held to review the results monthly with the team leaders in the various servicing areas. QC results and the status of remediation plans are reviewed by the risk committee at quarterly meetings.

Internal and external audits  

The third line of defense is the internal audit program, which operates independently of the first two lines of defense. As noted above, the VP of internal audit left the company since our prior review. The SVP of Freedom internal audit, who reports to the Freedom audit committee, is responsible for RoundPoint's internal audit program. The audit staff is made up of two RoundPoint employees and four Freedom employees. Freedom also has a dedicated IT manager who performs the RoundPoint IT audit. RoundPoint's audit committee is a sub-committee of the Freedom audit committee.

Internal audit performs a risk assessment across all auditable entities annually, risk ranks the quantified residual risk, and develops the annual audit plan based on input from the board of directors and available audit resources. Internal audit utilizes process maps and risk and control matrices in its risk assessment. RoundPoint uses an internal audit tool that acts as the central repository for all risk and controls across the organization. In addition to storing the data, the system is used for the risk and control certification process and to house all audit work papers.

Audit frequency is conducted on a 12-to 36-month cycle based on high, medium, or low risk rankings, with high-risk items scheduled to be tested every 12 to 18 months. The compliance team manages the remediation process, and internal audit validates completion before closure. Internal audit reports findings to the board and the operation managers, and audit issues are matched against regulatory requirements.

We reviewed various audits from 2021 and 2022 and considered them to be comprehensive. Audit reports include detailed outlines for the audit objectives, scope, and sample size as well as findings and remediation plans. There were limited high risk findings. Management states all associated action plans have been closed or have risk mitigation steps in place pending closure.

We also reviewed RoundPoint's Service Organization Controls (SOC-1) Type II report for the period from Dec. 1, 2021, through Jan. 24, 2023, and 2022 Regulation AB report. There were four exceptions noted in the SOC-1 report, all of which have been remediated or closed. There were no areas of non-compliance noted in the RegAB report.

Complaint management

RoundPoint manages customer complaints within the customer contact department; however, escalated complaints are managed by the risk department. All complaints are directed through a centralized intake process and input to the workflow and tracking system. Complaints are categorized as high- or low-risk based on the complaint source and content. Research pertaining to complaints is completed by the complaint staff as well as subject matter experts within the business units. All high-risk responses are reviewed by the QA manager and compliance before they are sent. For low-risk complaints, a sample review is performed. Customer advocates act as liaisons between the customer and the business unit. While RoundPoint sends all written responses as required, for escalated completed, the customer advocate will also call the customer within 72 hours of receiving the complaint to acknowledge receipt, attempt to resolve this issue, and set expectations for the formal response. When the resolution letter is ready to be sent to the customer, the customer advocate will call or email the customer with the results of the research, based on the customers preference. Reports are reviewed daily to ensure compliance with regulatory timelines. Root cause and trend analysis reports are distributed to the business units and the board of directors monthly. As of Dec. 31, 2022, RoundPoint averaged less than one day to acknowledge customer complaints and 23 days to resolve complaints, longer than the average days reported by peers.

Vendor management

RoundPoint has an established process for the selection, engagement, and management of third-party vendors, including conducting due diligence before approval. The responsibilities of vendor management were previously segmented into vendor management and oversight, offshore vendors, and attorney oversight but the team size was reduced and all functions are now managed by an AVP and one manager.

Vendor management works with the business to identify and select appropriate vendors. Once identified, a risk rating is assigned by the risk department based on a risk assessment scorecard. A vendor management application tracks and manages vendor requirements. The system includes workflows that allow users, including vendors, to work within the system. Vendors can complete questionnaires and upload required documents directly to the system. Requirements for due diligence and ongoing oversight are driven by the risk level.

The business units monitor vendors through monthly reports, scorecards, communication and meetings with the vendors, and periodic site visits. Scorecard metrics are developed by the business unit and risk management and approved by risk management. Monthly scorecards monitor overall vendor performance and get submitted to vendor management for all high-risk-rated vendors. Quarterly updates regarding vendor performance are provided to the third-party oversight committee.

A network of foreclosure and bankruptcy attorneys is managed by the business, vendor management, and the legal department. Vendor management oversees the on-boarding of new firms but the business now manages the annual reviews as well as the day to day oversight. Attorney scorecards are prepared by the business and are reviewed on an ad hoc basis by the head of vendor management. This is a change from the prior practice where they were reviewed monthly. Annual reviews include both a process review (now performed by the line of business) and a legal review (performed by RoundPoint in house counsel). Historically, annual on-site visits were conducted in the attorneys' offices, based on a risk rating or if issues are identified, however since the COVID-19 pandemic, RoundPoint has completed these reviews remotely. The default attorney network is tracked within the vendor management system.

Insurance and legal proceedings

RoundPoint has represented that its directors and officers, as well as its errors and omissions, insurance coverage is in line with the requirements of its portfolio size. As of the date of this report, there were no material servicing-related pending litigation items.

Loan Administration

The loan administration subranking is ABOVE AVERAGE.

New-loan boarding

RoundPoint has dedicated staff for its loan boarding and transfer process. It boards 100% of its loans electronically. In July 2022, RoundPoint implemented Black Knight's Loan Sphere Loan Boarding system. New loan boarding features include:

  • Data validation and reconciliations that are performed both pre- and post-boarding;
  • Critical data fields are validated through a document to system check on 100% of the boarded loans using optical character recognition, however certain data fields that pose higher risks (for example, interest rates and social security numbers) are reviewed by onshore staff due to the risk associated with incorrect data; and
  • Expanded document-to-system reviews for certain loan populations (ARM loans, previously modified loans, etc.) are completed.
Payment processing

RoundPoint has an efficient cash management operation that incorporates satisfactory internal controls, minimizing the risk of loss from human error or fraud, and that incorporates innovation to increase efficiency. Cash management is split into payment processing and cash operations. Payment processing is primarily responsible for the daily posting of funds received while cash operations is responsible for the controls and exceptions related to cash functions (reversals, suspense management, payoff quotes, etc.).

Highlights and controls of the payment processing function include the following:

  • RoundPoint processes approximately 96% of payments through electronic means, with about 4% posted manually, slightly higher than the peer average.
  • The lockbox file is run through a rules engine prior to posting to improve posting accuracy and reduce the number of payment corrections.
  • A similar rules engine is used for funds in suspense, which management says results in the automated posting of approximately 90% of suspense funds.
  • Payment processors reconcile postings to the system daily.
  • The cash management team operates in a monitored and controlled access area.
  • Bi-weekly and semi-monthly payment options are provided.
  • Borrowers can manage recurring and one-time drafts through the website.

Since our previous review, cash management has conducted the following changes:

  • Partnered with the call center to enhance the trailing payment process during loan transfers for timelier follow up and research;
  • Implemented, in September 2022, the MSP workstation allowing borrowers to setup their ACH to draft on any date (as long as it doesn't result in borrower delinquency), make payments from multiple bank accounts, and make semi-monthly payments;
  • Automated payoff posting transactions;
  • Created a new website which uses real time bank statement data to identify payment exceptions; and
  • Added analysis to determine the root cause of payment misapplications and create borrower focused campaigns to address the behaviors.
Investor reporting

The investor accounting area prepares reconciliations by confirming that loan and system balances agree with bank account statements. RoundPoint completes 100% of investor reporting and remitting electronically, in line with the industry. RoundPoint utilizes custodial and clearing account reconciliation software. There were minimal aged open reconciling items greater than 60 days for the second-half 2022 reporting period. Senior management reviews and approves monthly investor reports and reconciliations.

RoundPoint utilizes system functionality to manage investor portfolios. All purchase and sale agreements are captured within a database, which the investor reporting department can use to transfer loans to the correct portfolio. Logic is built around timing requirements for transfer dates. In addition, RoundPoint uses software for subservicing client invoicing and an automated process for transferring assets for interim servicing.

Since our previous review, RoundPoint streamlined the mapping of corporate advances on subserviced loans to provide more visibility as to whether an advance is recoverable from the borrower, claimable, or an expense for reimbursement.

Escrow administration

RoundPoint escrows approximately 86% of accounts in its prime servicing portfolio for taxes and insurance. A national tax vendor only tracks taxes. RoundPoint manages disbursements, tax-related calls, and escrow analysis in-house. A national insurance vendor monitors insurance policies and payments. RoundPoint has a dedicated in-house loss draft team utilizing a workflow system that is visible to call center and escrow staff.

RoundPoint has implemented process and automation changes since our prior review including:

  • A process to run a comparison of new loans boarded with mortgage insurance against the mortgage insurance carrier's database to reconcile the loans in the servicing system.
  • An escrow overage/shortage review process which incorporates automation to add more loan details as to the drivers of the overage/shortage to the standard MSP exception report that helps expedite the handling decision.
  • A calculator is used to run loss draft rules using data pulled from the servicing system and provides handling instructions for the specialists to follow.

Escrow management processes and statistics are as follows:

  • RoundPoint continues to report non-reimbursable tax penalties ($0.30) much higher than we see from comparably ranked peers. Management says they expect this metric to be higher because they manage all but the tax tracking in house but they also experienced reporting delays by the taxing authorities which left a shorter time for research.
  • Escrow turnover rates of 16.7% are higher than the average reported by peers.
  • The insurance vendor's 0.5% abandonment rate and 11 second average speed of answer are better than those reported by peers.
  • Monthly report cards for the insurance vendor and annual site visits monitor performance.
  • Call monitoring of the insurance vendor is performed.
  • A PMI checklist that populates data from the servicing system streamlines the data input tasks associated with PMI removal reviews.
Mortgage reconveyance

RoundPoint uses a third-party vendor for its mortgage reconveyance process. The company reported that no reconveyances in processing were out of statutory compliance. In February 2023, the document custody and control team implemented the first phase of a process which will automate the request to the custodian for the collateral file when a loan is paid in full. The last phase is expected to be completed by the end of the second quarter 2023.

RoundPoint has seen an increase in the number of loans it services originated with electronic notes. It uses an electronic vault vendor to house the notes. A physical collateral file is created when there is any action impacting the note.

Special loans administration

For adjustable-rate loans, personnel perform dual verifications to confirm that the indices are correctly input into the system. A weekly scrub of the portfolio against the Defense Manpower Data Center is performed to identify loans where a borrower qualifies for benefits under the Servicemembers Civil Relief Act (SCRA). For qualified borrowers, RoundPoint updates their accounts for the provisions of the SCRA whether the borrower requests them or not. In addition to the weekly review, there are multiple reviews performed before foreclosure referral or sale to confirm the borrower is not affected by these regulations.

Customer service

RoundPoint's customer contact group is comprised of customer service, collections, the customer contact department that includes the complaint management (correspondence), letter fulfilment, workforce management, triage, and customer advocate teams.

The customer service team handles loans that are pre-30 days delinquent as well as customer inquiries while the default contact center team is made up of triage (collections and pre-loss mitigation) and single point of contact (SPOC).

RoundPoint uses a survey for customers that is a single question and provides the opportunity to leave a voice mail. The QA team listens to all negative survey results and the associated calls.

Attributes and metrics are as follows:

  • There was no management turnover and staff turnover was about 24%, both of which are comparable to peers.
  • An interactive voice response (IVR) system for specific call inquiries assists borrowers in obtaining information regarding payment status, escrow items, making a payment by phone and website password resets also has a call back feature.
  • The IVR capture rate was 62% for the second half of 2022.
  • The average speed of answer for both customer service and collections and the abandonment rate for customer service were comparable to those reported by peers while the abandonment rate for collections was better (see Table 5).
  • The percent of registered website users of approximately 66% is lower than that reported by peers but with the large transfers RoundPoint has been involved in, it is not unusual for this number to drop.
  • RoundPoint does not have a mobile application.
  • There are dedicated chat agents.
  • Weekly meetings are held to review new letter content with the line of business and compliance, which are then routed to senior management and compliance for review and approval. After setup with the print vendor, the letter fulfilment team monitors the ongoing production and imaging.

Table 5

Average speed of answer and abandonment rate
Average speed of answer (seconds) Abandonment rate (%)
Customer service 47.53 2.32
Collection 48.88 1.44
Loss mitigation 61.74 16.58

A welcome email is sent to new customers prior to boarding which provides critical information to the borrower including what to expect, their new loan number, a link for online portal registration, and a link if the loan is identified as an in-flight loss mitigation account for the borrower to confirm. If the borrower confirms they are actively engaged in loss mitigation, the account is pushed to an agent for review. These enhancements to the welcome process were implemented in October 2022.

Default management

While turnover rates for default management staff where overall worse than peers except for loss mitigation and foreclosure staff, industry experience is generally longer than peers. Management industry experience and staff tenure are both lower in collections and foreclosure than peers (see table 6).

Table 6

Experience and tenure
Management Staff
Avg. industry experience (years) Avg. present employer experience (years) Turnover rate (%) Avg. industry experience (years) Avg. present employer experience (years) Turnover rate (%)
Collection 12.40 6.40 0.00 14.50 2.40 25.00
Loss mitigation 10.76 9.33 100.00 14.50 6.96 0.00
Foreclosure 10.00 3.71 33.33 9.30 1.86 20.00
Bankruptcy 7.25 4.08 0.00 9.30 5.50 50.00
Real estate owned 11.47 10.33 0.00 17.67 1.73 0.00
Avg. industry experience (years) Avg. present employer experience (years) Turnover rate (%) Avg. industry experience (years) Avg. present employer experience (years) Turnover rate (%)
Collection 17.37 6.50 3.86 13.21 4.39 17.36
Loss mitigation 10.87 6.28 6.93 5.54 5.09 8.17
Foreclosure 14.31 6.55 15.41 5.20 4.20 9.60
Bankruptcy 7.82 5.82 6.15 6.17 5.17 10.00
Real estate owned 9.43 7.93 9.07 9.21 8.54 4.00

RoundPoint reported a year-over-year increase in delinquency, however, between the transfer out of the Freedom portfolio and the transfer in of the Two Harbor portfolio, a year over year comparison may not show the full picture (see table 7). There was a degradation in the transition rates for the 60+ buckets from higher-to-lower delinquencies, as well as those from 90+ buckets for the lower-to-higher delinquencies.

Table 7

Prime delinquency rates
Year Total delinquency (%) 30-59 days delinquency (%) 60-89 days delinquency (%) 90+ days delinquency (%) Bankruptcy (%) Foreclosure (%) Real estate owned (no.)
Dec. 31, 2022 4.00 2.09 0.49 1.43 0.13 0.21 2
Dec. 31, 2021 3.13 0.91 0.24 1.98 0.22 0.11 1
Dec. 31, 2020 5.96 1.02 0.52 4.43 0.27 0.19 1
Dec. 31, 2019 4.31 2.18 0.90 1.23 0.42 0.60 179
Dec. 31, 2018 3.52 1.99 0.61 0.92 0.32 0.43 198
Collections

RoundPoint's customer care triage team manages all accounts 30- to 60-days past due. Calling campaigns are based on a behavior model. The call center is blended between inbound and outbound calls, and the behavior scoring model is used for borrowers that are three- to 15-days delinquent. Collectors may handle contact with the borrower until loss mitigation assistance is requested, or where the delinquency is greater than 60 days. SPOCs are assigned when loans are boarded, which collectors will reference when transferring the borrower. In late 2021, RoundPoint started to text payment reminders to borrowers.

Loss mitigation

Since our previous review, loss mitigation was moved under the default management team and a new VP of loss mitigation was hired. She reports to the SVP of default servicing. It also transitioned to BKFS' Loss Mitigation solution.

RoundPoint's SPOC model includes the contact center triage team. The triage team members handle the collections and customer contact for all delinquent loans through resolution, loss mitigation activation, or liquidation. RoundPoint assigns SPOCs at the time the loan is boarded to the system, but they do not become engaged until the borrower is in active loss mitigation, whether it is a retention (modification) or liquidation (short sales and deeds in lieu) solution. SPOCs are aligned by portfolio and/or investor type. RoundPoint can use a variety of loss mitigation options to resolve delinquencies; however, loan modifications and forbearance plans, forbearance remains the predominant solutions in use (see table 8). The home emergency assistance response team (HEART) was moved from the call center and incorporated into the SPOC team since our last review. HEART previously focused on borrowers impacted by natural disasters but with the move the loss mitigation, it now also works with borrowers facing non-disaster hardships.

Table 8

Loss mitigation breakdown (%)
Resolution type Prime
Deed-in-lieu 0.00
Short sale 0.00
Repayment plan 0.00
Modification 43.07
Forbearance plan 56.93
Other 0.00
Total 100.00

The loan processing team is segmented into specialized job units:

  • Vendor orders;
  • Vendor order fulfilment, which reviews the documents on the receipt;
  • Income/asset calculation; and
  • Permanent modification calculation, which reviews all modification documents and updates the agency systems with the modification data.

Processes, controls, and metrics we considered include the following:

  • RoundPoint uses an industry-recognized loss mitigation workflow system to help streamline and automate the loss mitigation process.
  • Every evaluation processed by RoundPoint goes to an underwriter for recalculation.
  • Management uses real time dashboards to monitor metrics.
  • RoundPoint improved its average speed of answer but continues to report higher-than-average loss mitigation abandonment rates (see table 5).
  • The average number of days to a workout decision was 26, comparable to similarly ranked peers.
Foreclosure and bankruptcy

The foreclosure and bankruptcy department is divided into three areas:

  • Operations, which performs all tasks associated with foreclosure and bankruptcy accounts, aligned by investor.
  • Oversight, which performs timeline management and works with counsel and investor, aligned by investor.
  • QA, which reviews 100% of the work completed by the operations team and by counsel, aligned by document type and investor.

Highlights and controls of the foreclosure and bankruptcy process are as follows:

  • Prior to referral to foreclosure, the loan and associated documents are reviewed.
  • Workflows within the default servicing platform are used for both foreclosure and bankruptcy processes.
  • Foreclosure bids are calculated automatically based on loan parameters.
  • Pre-sale certifications are completed and must be approved prior to foreclosure sale.
  • SCRA checks occur periodically from the time of referral through the foreclosure and post-sale processes.
  • There were no claim curtailments or denials.
  • All bankruptcy proof of claims (POCs), payment change notices, and motions for relief are reviewed by RoundPoint staff and filed by the attorney.
  • A post-filing review validates the accuracy of the documents filed with the court.
  • RoundPoint reported that no POCs were rejected by the court for the second half of 2022.
Real estate-owned (REO)

RoundPoint utilizes a national REO vendor to manage its limited REO portfolio. The RoundPoint asset manager is responsible for overseeing the vendor using key metrics to monitor performance, including turn rate and execution rate. List, offer, and sales price are reviewed and approved based on investor delegated authority or sent to the investor for approval. An REO dashboard provides greater transparency of the portfolio status.

Financial Position

The financial position is SUFFICIENT.

This report does not constitute a rating action.

Related Research

Servicer Analyst:Leigh Stafford McLean, Dallas + 1 (214) 765 5867;
leigh.stafford@spglobal.com
Secondary Contact:Mark J Shannon, New York + (404) 989-7655;
mark.shannon@spglobal.com
Analytical Manager, Servicer Evaluations:Robert J Radziul, New York + 1 (212) 438 1051;
robert.radziul@spglobal.com

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