The media has been flooded this past week with positive news on the housing market. Sales of existing homes show definite signs of life and construction jobs are rebounding, making it is easy to sit back and breathe a sigh of relief.
However, in taking a second look, it is important to keep in mind that we are not out of the woods yet. According the National Association of Realtors, distressed properties with deep discounts accounted for approximately 35% of the sales in January, with many of them being investors involved in all cash transactions.
Potential homebuyers are continuing to hang in the wings, even though there is an inordinate stock of options available and mortgage interest rates hovering at unprecedented lows. Pent-up market demand may be a strong market recovery driver but new underwriting guidelines and homes still so far underwater present barriers to many.
Lender Processing Services recently reported that there are now more than 6 million delinquent mortgages, including both loans that are 30-plus days delinquent and those in foreclosure. While many of these 6 million mortgages will eventually run the full gamut of the foreclosure process, it is important to salvage as many as possible from that population to help ease the “bleeding.”
Loss mitigation efforts of many government and lender/servicer initiatives have met with varying degrees of success (or failure depending on your point of view).
One of the most noteworthy areas of pain for all programs has been effective borrower communication. In an effort to streamline and address communication issues, the Treasury Department introduced single point of contact guidance to servicers offering HAMP modifications.
The SPOC guidelines have been met with varying degrees of resistance as many believed it would prolong the backlog of unresolved delinquent accounts and add to the number of employees required to stay compliant.
Despite these objections, Wells Fargo has implemented an incentive program to its point-of-contact employees who successfully bring their case files to successful resolutions rather than foreclosure.
Though many would argue this is cost prohibitive, and it probably is up front, on the back end the cost savings realized in not having to maintain and sell or rent an REO property can be monumental, especially in markets that are highly oversaturated with distressed assets.
Admittedly, there has not been enough time elapsed to properly apply metrics to costs involved and cost saving realized, but there is an immediate lift in the perception of a positive customer-centric business model that is an essential component for future growth and success.
Diane Gozza is EVP, business development, Integrated Mortgage Solutions, Houston.