Loan modifications continued their dominance as the primary method for foreclosure prevention in 2013, both through government-driven and proprietary servicer programs.
Even after “millions served,” there may still be some reticent misgivings about the effectiveness and sustainability of these solutions for deeply distressed homeowners. It prompts a couple of myths in our industry. The first: Some loan modifications just delay the inevitable.
As a respected provider of supporting services at every stage of the default waterfall, we see that a borrower’s individual level of cooperation may be as indicative of long-term success as their financial condition. The more engaged a borrower is in the pre-default stage, the higher the probability of finding a sustainable solution.
We applaud servicers that discover this underlying truth and go beyond the standard efforts to reach distressed borrowers through direct mail, phone contact, Internet and email campaigns. This engagement is not limited to first contact; borrowers must be continually encouraged to provide the required documentation and participate in the signing process. This consistent effort can be more challenging because of the emotional state of the borrower, who may be reluctant to trust or subconsciously avoids the situation.
While we’re not aware of any servicers using analytics to link a borrower’s active participation level with successful loan modification results, we see an increased interest in the use of electronic platforms that allow borrowers to collaborate in the loan modification process via secured Internet. From submission of critical documents to electronic document signing, web-based communication creates an emotionally safe environment that fosters improved borrower participation in the loan modification process.
The increased need for contact spawns another myth: The rising cost of compliance is driving down the accessibility of loan modifications.
Initially, servicers did incur additional costs to implement single-point-of-contact services, the all-knowing one-to-one contact intended to guide borrowers singularly through the default process.
While costly, this significant change may have triggered some progressive process and system improvements that could ultimately reduce operating costs. We observed an increased use in workflow automation—with servicers relying more on computer systems to move tasks effectively between teams, behind the scenes. Some servicers chose to consolidate their systems by reducing the patchwork of task-specific software and replacing legacy platforms.
Many opted for better integration and data exchange with their preferred providers to streamline processes and reduce costs. Ultimately, the efficiencies prompted by change may help balance the cost equation for loan modifications.
Beyond these myths about sustainability and accessibility, we hear one fundamental belief consistently from all of the servicers with which we work: preventing foreclosure and keeping families in their homes, whenever possible, is always a worthwhile endeavor.
Kevin Wall is president of First American Mortgage Services, a division of First American Title Insurance Co.