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optimizing their CWCOT claims channels. The typical obstacles to the successful implementation
of a CWCOT claims channel program include:
• Lack of an effective framework to utilize available data to produce actionable outputs
for decision-making
• Lack of access to intuitive technology platforms to streamline processes for
consistent and predictable outcomes
and
• Information asymmetries and timeline delays associated with coordinating numerous
vendors and services throughout the CWCOT value chain
These common obstacles often delay conveyance and increase conveyance costs. By some
estimates, the nation's largest banks have lost more than $100 million combined each year under
the program
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with actual losses potentially significantly higher; few benchmarks are available to
evaluate average industry costs.
Obstacle 1: Effectively Utilizing Available Data to Make Decisions
A significant obstacle to optimizing CWCOT outcomes is the ability to leverage available data and
analytics to make better decisions. While most information is available to servicers — including
asset level, mortgage, market and vendor cost data — servicers often struggle to synthesize the
information to produce clear, meaningful outputs that aid decision-making.
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This inability to synthesize data to produce actionable outcomes is evident in the waterfall
resolution strategies utilized by most servicers for CWCOT assets (see Chart 2). The waterfall
resolution can be summarized as simply, "Try this, and if it doesn't work, then try this." This
approach often creates timeline delays, increases costs and causes unnecessary escalations for
servicers. This is because each action plan in the waterfall is (a) isolated from a broader view of
outcomes, (b) sequential in order, starting with the path of least resistance and (c)
undifferentiated across a portfolio of assets.
In decision theory, waterfall resolution could be referred to as a "satisficing" approach, a
combination of "satisfy" and "suffice."
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The goal in a satisficing approach is to find a "good
enough" outcome when individuals either cannot access all information required to make a
decision or are overwhelmed by the volume of data. Even if individuals could access all
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https://www.housingwire.com/blogs/1-rewired/post/37733-heres-the-best-way-to-interpret-the-fhas-cwcot-program
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Required information for decision-making includes the initial and subsequent valuations, asset level condition, repair bids and
reserve prices.
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http://www.economist.com/node/13350892; Herbert Simon, who won the Nobel Prize for economics in 1978, is credited with
coining the word "satisfice" to describe how the human mind necessarily restricts itself, bound by cognitive limits, when access to all
information is required but not possible or accessible but not able to be processed. In these cases, the human mind will seek a
solution that is "good enough," not necessarily optimal but satisfactory.
