What's a Servicer To Do In Today's Demanding Market?
A recent report of housing counselors by NeighborWorks America, a non-profit organization created by Congress, provided additional confirmation of what everyone in the industry already knows: servicers are overwhelmed.
According to the report, the number one complaint of NeighborWorks America counselors is the response time of servicers. Some counselors said it took as long as 45 to 60 days to receive a response after the workout proposal was formulated. Servicers' employees are described as overworked, counselors reported that documentation had to be resent on some occasions and that they had to work with different representatives. These factors are seriously slowing down and deterring the process of keeping troubled borrowers in their homes.
The boom in servicer business is the result of the Home Affordable Modification Program and the Home Affordable Refinance program that were announced by the President in February 2009. Since March 4, 2009 when the US Treasury Department published guidelines to implement the program, companies servicing government insured or guaranteed loans or that received TARP funds were instructed that they must participate in HAMP or HAR. It is mandatory.
With this mandate came extensive guidelines for servicers to follow to offer uniform modifications, which is the major activity resulting from the program, and the amount of work they have to process on a daily basis has exploded.
According to a recent U.S. Treasury report, more than 60,000 modifications have been performed in the country. While that number seems large, it is merely a drop in the bucket compared to the millions of loans that are still at risk.
Let's consider why the increase in volume is an issue for servicers.
Servicers have historically been primarily tasked with collecting mortgage payments. However, the realm of responsibilities in the current climate now includes financial counseling, modification program education, financial information gathering and re-underwriting the borrower to customize the terms of a loan to "right size" the loan for the borrower. If the borrower does not qualify for a refinance or a modification, then other options must be considered.
Some servicers have experienced success engaging third parties who are capable of providing specialized resources and technology designed to successfully manage HAMP and HAR campaigns.
The HAMP and HAR programs are very document-intensive processes, requiring a servicer to generate large volumes of compliant forms to borrowers as well as manage a large volume of incoming support documentation provided by borrowers. Specialized systems and resources are required to manage this documentation flow and establish processes to review the borrower's information as well as underwrite the loans.
Servicers also realize the sooner that a delinquency problem is recognized, the more options and flexibility a servicer has. In other words, the more a servicer gets in front of borrowers at risk of imminent default, the more success they have in helping them to resolve their issues.
As servicers continue to experience crushing work volume levels, it will become increasingly important for them to develop solutions to execute the requirements of the programs, let alone be proactive. Working with partners already participating in the various programs with proven expertise as well as the technology to perform the tasks efficiently has been a successful option for many. Working with a qualified mortgage service provider allows servicers to more efficiently address the needs of their borrowers. It also enables servicers to better manage their operating costs. Rick Seehausen is the president and CEO of LenderLive Network Inc., a provider of mortgage outsourcing solutions to some of the nation's largest financial firms. His expertise is in strategic guidance and management of operating activities, including, information technology, mortgage operations, accounting and marketing infrastructure. He can be reached at firstname.lastname@example.org.