Honest Brokers Between Various Parties
With mortgage defaults and foreclosures stubbornly stuck at record highs and servicers still overwhelmed by the fallout, it’s small wonder that borrowers feel they are at the wrong end of an adversarial relationship with their lenders, servicers and almost anyone positioned as a helpful intermediary.The perception grows daily that these entities are arrayed in an alliance that is unable (or unwilling) to fully help homeowners. At least that’s what we hear in our many thousands of field service calls each month. These affected borrowers – some of whom feel harassed by collection departments - come to a point at which they just ignore servicers who attempt to make contact through phone calls and letters. Follow-up contacts are all largely unsuccessful. Even borrowers previously in contract for a loan modification suddenly are disengaging. Why? There are two reasons for this phenomenon. First, some borrowers decide that they are unwilling to provide income information or verification, which is essential to the execution of a loan modification, because they were dishonest in their original mortgage applications, and fear repercussions. The other reason is that they do not understand the information sent to them and need a high-touch process to discuss their trepidation and concerns. With the sheer volume of defaulters, which is simply too large to be met by current servicer staffing levels, spending valuable time going over HAMP or other loan modification packages thoroughly, case by case, is nearly impossible. A solution we have seen is to offer the borrower a choice to either phone-review the documents or have someone come out to their house to assist. A special toll-free number at our office takes hundreds of calls a day from those needing such in-person assistance - and we have nearly a 100 percent fulfillment rate on these files. These homeowners are not just the usual suspects, i.e. holders of subprime loans and a variety of exotic products (pay-option ARMS, negative amortization, stated-income). More prime borrowers are now falling behind. According to the Mortgage Bankers Association, the number of prime borrowers with payments past due has increased, as these homeowners battled problems associated with the economic recession. Indeed, the MBA reckons that losses on prime loans could become a bigger problem for banks than subprime agreements. There is now industry-wide acknowledgement that overwhelmed servicers must have outside help. This was evident in a public pronouncement by Fannie Mae’s President of National Servicing, who said recently: “We recommend they use vendors for face-to-face contact.” There are now incentives for servicers to outsource.Such third-party support, in the form of borrower contact companies is especially productive - in large part because unlike money collectors, field service firms can be honest brokers between various parties, often defusing what many times is a highly charged interaction.Freed from the demand to collect payments, the goal is to create a human connection on a local level. Firms like ours can generally connect with close to 70 percent of people we attempt to reach, and a large majority of these borrowers are ultimately able to avoid foreclosure. Today, field service firms are engaged to work one-on-one with borrowers to ensure that loan modification documents are completed correctly and promptly submitted for processing. This results in an increased likelihood, among at-risk borrowers interested in a loan modification, of avoiding foreclosure. These loss mitigation experts not only provide insightful guidance, but also necessary assurance to the borrower during every step of the process.When this is done right, there is a 60 to 70 percent success rate.Engaging a borrower contact company gives servicers the ability to reach out, face-to-face nationwide with at-risk borrowers. It is widely recognized as the most effective way to achieve sustainable loan modifications and, for a significant majority of those interested in a loan modification, avoid foreclosure.Borrower contact companies are also on the front line in terms of what is next, and servicers who engage them are also well-positioned to modify their solutions quickly to identify and address emerging trends. By engaging a vendor to meet with these borrowers in the unique and intimate way that only these loss mitigation professionals can, the information can be presented in an extremely effective manner. Without question, borrowers will actively “re-engage” with their servicer by phone and maintain such contact if they have a “positive” experience face-to-face. Just as the case when you finally meet a long-time client in person, the relationship grows stronger. Loan modification, short sales and deed in-lieu opportunities are also missed by borrowers who are overwhelmed and have simply given up on their servicers. By employing an army of staff in the field to contact borrowers face-to-face, along with call center loss mitigation teams, everybody wins. Effective field contact strategies will have a net measurable effect of re-engaging the at-risk borrower into the loss mitigation process as can be seen by increased borrower contact rates, increased loan modification fulfillments or increased information that directs the servicer to the best exit strategy. In all, the role of the “honest broker” can be very fruitful. Jay A. Loeb is the vice-president and a principal owner, National Creditors Connection, Inc (NCCI), Lake Forest, Calif.