HAFA Spurs Interest, Automated Compliance Solutions

The mortgage industry is readily welcoming the implementation of the Home Affordable Foreclosure Alternatives program.

Travis Hamel Olsen, chief operating officer of Loan Resolution Corporation, Scottsdale, Ariz., a provider of loss mitigation solutions for banks implementing HAFA, finds that there is "substantial interest" from the public about HAFA as an option to exit the property gracefully.

At the same time, "a lot of short sale offers were being withheld from our clients so that they could be submitted to us under the new HAFA rules," he said, so going forward servicers may significantly increase HAFA activity. Effective April 5 - the Treasury Department will increase the subordinate lien contribution to homeowners who agree to do a short sale instead of foreclosure from $1,500 to $3,000, while the junior lien contribution increases from $3,000 to $6,000. The expectation is that a tremendous increase in short sales will help reduce foreclosures and give a boost to the real estate market.

Lenders busy handling this new legislation hoping to curtail discouragingly high foreclosure rates and the threat of the so-called shadow inventory are getting a helping hand from automated solutions.

Stewart Lender Services is offering a new tool designed to assist lenders and servicers comply with the Supplemental Directive 09-09, 10-01 and other changes under the Home Affordable Modification Program, which were recently issued by the Treasury Department. The SLS borrower outreach team collects financial packages and conducts the underwriting for borrowers who qualify for the new Home Affordable Foreclosure Alternatives program, and performs upfront title reviews to determine whether a short sale or deed-in-lieu is the best option. Also, the system assists lenders following Resolution of Active Trial Modifications 10-01, during the conversion from a stated income to a verified income model and the imminent default rule changes and the measurement of debt coverage ratios for borrowers less than 60 days delinquent.

Market insiders expect unprecedented growth in demand for short sales and deed-in-lieu processing encouraged by HAFA. To meet that growth Loan Resolution Corp., Scottsdale, Ariz., added 100 full-time positions bringing the total number of employees to 170. The new staff range from executive positions, including senior vice president of default, to entry-level positions such as solutions specialists, processors and asset managers, and will be accommodated into a 30,000-square-foot office in North Scottsdale.

Travis Hamel Olsen, chief operating officer of LRC, says they will be busy "working with multiple top-five servicers to assist them in reducing the blight of foreclosures in our neighborhoods across America."

While HAFA steers struggling homeowners toward short sales instead of foreclosure in an effort to reduce foreclosures, it represents another regulatory burden servicers need to face. To be able to successfully implement HAFA lenders also need to comply with state laws, which add to the pressure to improve loan processing efficiency through automated solutions. At the state level, the Conference of State Bank Supervisors and the American Association of Residential Mortgage Regulators developed the examination automation initiative to bring greater uniformity and modernization to the mortgage examination process, an effort that resulted in the establishment of the Nationwide Cooperative Agreement for Mortgage Supervision. Under NCA states can share information and coordinate the supervision of lenders following guidelines that require examiners to move from sample-based audits to looking at all the loans originated.

The regulatory landscape continues to become more complex, says Laura LaRaia, an attorney and director of customer service at MRG Document Technologies, so it is vital for lenders to have automated processes in place in order to comply with state and federal regulations. That demand is at the basis of a MRG-ComplianceEase partnership, which is based on what could be called a "second degree" of technology integration that ultimately brings about a higher degree of automation in mortgage examinations. MRG serves as a RegulatorConnect certified partner that provides mortgage document preparation and compliance technology to banks, credit unions and other lenders so users can submit loan data for industry standard electronic submission to state regulators. It enables users to access fully compliant document packages and prepare data from those documents, says LaRaia. ComplianceEase fit the project, "in part due to its ability to provide technology to automate the testing of loans for compliance."