John Walsh is a true industry thought leader and trailblazer. There really is no other way to describe him. He’s bold and doesn’t shy away from giving you his honest opinion. John is the Chief Executive Officer of LERETA. Under his leadership, LERETA is focused on solidifying its strategic direction to continue to deliver the best results to its customers. He leads an executive leadership team focused on providing the mortgage and insurance industries accuracy, responsiveness and innovative technology. In this talk with our editors John shares his story, his interests, his thoughts on the market and what’s next for LERETA.
Q: How did you get into the tax service business?
JOHN WALSH: I’ve been in mortgage banking for over 30 years. In my first ten years, I was on the originator/servicer side of the business, including being a principal in a couple of mortgage companies. 20 years ago, I moved over to the dark side as a vendor. Since then, I’ve run four different companies selling almost everything legal to mortgage lenders. One of the products I had not sold previously, however, was tax service. In every other company I’d been involved with, the primary goals had always been evolving the business, improving our solutions and innovating. After joining LERETA, one of the first things that struck me was how little tax service as a business had evolved. Over the last six years, its been my mission at LERETA not only to provide materially and demonstrably higher service levels, but to bring innovation to the industry. I’m excited about what we’ve done so far, but more excited about what the future holds.
Q: I recall from our conversations that you are a big Marvel Comics fan? What’s the attraction and why do you prefer Marvel Comics over DC?
JOHN WALSH: Hilarious! First, for folks that don’t know, DC and Marvel are the two largest comic book companies. DC has characters like Batman, Superman, Wonder Woman, The Flash, etc. Marvel has Spider-Man, Captain America, The Hulk, Wolverine, etc.
When I first started reading comic books, I was drawn to the Marvel titles because I thought the characters were both more interesting and more relatable. The Marvel Spider-Man stories were as much about Peter Parker’s (Spider-Man’s alter ego) challenges as a teenager rather than just the heroics. As a young person, I found that much more interesting than an alien with a cape who was basically all powerful and indestructible. Over time I was attracted to other Marvel characters for the same reason. Having said all of that, today I appreciate both (I just wish DC would make better movies!).
I think the business history of the two firms is frankly more interesting. DC was first to market and from the 30’s to the 50’s they owned the market. In the 60’s, Marvel started to introduce exciting new characters, new stories and quickly started to eat away at DC’s market share. DC didn’t recognize the threat and continued to do what they had always done. In the end, the customer got a better product. I think this is a good analogy for other industries.
Q: Forecasters have been warning that higher property tax bills are coming, thanks to home price appreciation. What should servicers be doing to anticipate issues with rising taxes?
JOHN WALSH: As we’ve all seen, home price appreciation is at an all-time high, exceeding even the most aggressive estimates. But with that good news comes the inevitable reality of higher taxes for homeowners and with that more potential for problems for servicers in the form of exceptions and unhappy borrowers. Some servicers are prepared and in a good position to handle higher call volume and increased customer questions and complaints, but others will fall short. If they haven’t already, servicers need to be asking the right questions and not shy away from honest answers in order to make necessary adjustments. Questions like: Is your company prepared and equipped to address mortgage payment changes due to tax increases? Does your team have a proactive plan to handle borrower communications on tax increases, including messaging on websites, blog posts, statement stuffers, call center scripts, email communications? Is your company monitoring increases in tax-related complaints to the CFPB or within corporate social media platforms?
Servicers need to ensure they have plans in place that effectively address these concerns. One way to do that is to balance the use of automation and human expertise. It’s important to understand where automation can fail in catching loans with exceptions that could lead to unhappy borrowers. Everyone is all for the efficiency of automation until something goes wrong, and it’s these exceptions that need to be planned for.
That’s why LERETA takes a different approach to technology and automation. We understand the critical importance of having human expertise that can fill the exception gaps. We’re committed to constantly investing in technology to continually improve accuracy and service-level performance, and our technology is certainly one of the primary reasons we’ve hit 99.9% of SLAs for our clients so far this year. But just as important, we are committed to investing in talented tax experts who are skilled in the nuances of various tax jurisdictions and who can anticipate issues before they arise. For us, it’s not an either-or proposition when it comes to technology and domain knowledge. We’re expert in both.
Q: You have been a vocal advocate about the need for better supply chain management for lenders for years. What risks are servicers potentially exposing themselves and their customers to by not having a plan?
JOHN WALSH: Over the last two years we’ve seen countless supply chain disruptions over numerous industries. The causes have been across the board: the pandemic, weather, vendor failures and now war. Having a solid plan for when (not if) a supply chain disruption occurs is critical for all businesses.
Typically, mortgage servicers have redundant providers in place for all critical services: credit, valuations, telephone, flood, etc. However, most servicers still work with a single tax service vendor without a backup planning for unforeseen events. This is probably a manageable challenge for lenders with small, geographically concentrated portfolios. If for some reason your vendor can’t perform, paying taxes across a limited number of agencies in an emergency is manageable. However, a servicer with a national portfolio might be paying taxes to 20,000+ agencies. What happens if that tax vendor fails in the fourth quarter? Taking this in-house isn’t realistic.
Unexpected and fast-moving disasters can and will happen, and not having redundancies and in place can cause catastrophic consequences. It’s a risk that many don’t want to think about or plan for until it’s too late.
Q: How can vendor diversification drive improved performance?
JOHN WALSH: So far, we’ve talked about vendor diversification in terms of business continuity. There are other advantages of working with multiple tax service providers. With only one vendor, if you’re unhappy with their performance, as many servicers are, you only have two options: live with the sub-par performance or go through a total migration. Having two vendors allows for the creation of champion/challenger scenarios to improve performance.
Recent supply-chain disruptions have shown that relying on a single vendor – no matter what business you’re in – isn’t prudent. We’ve been championing the benefits of diversification for some time, helping clients understand how they can reduce risk, enhance contingency planning and improve performance by having multiple vendors in place. Because of LERETA’s simplified implementation process, integrating with existing loan servicing systems can be easy and cost effective. When you consider the potential risk and associated costs in case a single tax vendor goes down, it’s not hard to justify the reasonable cost and time to diversify. The tax servicing industry is one that for decades didn’t see much change or improvement. But LERETA has rewritten that narrative, and one of the important, new story lines is to diversify in order to increase opportunities for success. The concept is finally catching on, and servicers are now more inclined to see the direct benefit to the bottom line.
Q: LERETA has recently coined the term “simplementation.” Can you explain this a little more?
JOHN WALSH: Many clients put off bringing on a new tax vendor because of their concerns with the implementation process – the perceived risk as well as the time and talent costs that are associated with changing or adding a new provider. At LERETA, we ensure the implementation process is as simple as possible for our clients – and we call it simplementation because it completely simplifies the implementation. Our track record and expertise in doing this hundreds of times has given us a formula that gives clients peace of mind by providing:
- Transparency – Being transparent about the time frame, resources needed and involvement required on both sides allows clients to fully understand the process, what’s expected of their teams and how they can work with us to ensure success in the process.
- Process Assessment – We work closely with our clients to research critical questions about existing processes, gaps and efficiency goals as well as required business rules for non-escrowed accounts so that we all know going in how the implementation needs to be set up for maximum efficiency and effectiveness.
- Project Management – For our clients who don’t have internal project management teams, we match our extensive project management resources with what they do have, and provide even more robust turnkey services for seamless implementation.
- Business Rules/Procedures – Many servicers don’t have documented business rules or tax procedure user guides that inform how their tax lines are set up. As part of the Simplementation process, we provide our clients with proper documentation to ensure success not only during initial implementation, but on an ongoing basis
- Best-practice recommendations – Because we specialize in property tax, we’re able to provide customized and recommendations to improve accuracy and increase efficiencies.
Q: What’s next for LERETA?
JOHN WALSH: We’ll continue our unwavering commitment to invest in technology, experienced tax experts and infrastructure to meet the needs of mega-servicers and sub-servicers as well as regional and smaller players. This commitment has allowed us to perfect managing the vagaries of tax servicing, not only with automation that provides consistent and efficient results, but also with expertise to handle the exceptions and anticipate potential issues before they become actual problems.
LERETA has traditionally competed by providing the highest level of customer service in our markets, and this has allowed us to be successful in adding new customers and building market share.
We look forward to exceeding our clients’ expectations with superhero performance and surpassing our competition to elevate the tax servicing industry to new heights.
John Walsh is the Chief Executive Officer of LERETA. Under his leadership, LERETA is focused on solidifying its strategic direction to continue to deliver the best results to its customers. Walsh leads an executive leadership team focused on providing the mortgage and insurance industries accuracy, responsiveness and innovative technology. Walsh has more than 20 years of senior management experience in the financial services industry and more than 10 years leading technology firms. Prior to joining LERETA, Walsh was the President of DataQuick, a nationwide provider of real estate property information, analytics and mortgage settlement services. Previously he was the President of Del Mar Database, a provider of technology solutions to residential lenders. Earlier in his career, Walsh was also President of RF/Spectrum Decision Science Corp and Chairman and CEO of PureCarbon, Inc. Additionally, he has held executive management positions at several mortgage companies and banks earlier in his career.
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