Expert Says One HAMP Side Effect is Patchwork Technology
Servicers may be missing out on mortgage technology advances of the past few years due to capacity pressures and HAMP compliance challenges.
Unprecedented innovation has brought new technology at servicer’s fingertips, but not to the extent it is realistically possible because in many shops loan-processing systems are patchwork technology, says Umesh Verma, president of Commerce Velocity LLC Irvine, Calif.
The industry is focusing on processing efficiency, Verma says, and that is achieved through cutting-edge technology that is readily available to servicers today. But “the devil is in the details,” what is realistically doable, how fast it can be done, and at what cost.
If one looks at what should be done and how differently, “You can’t even get to some of the creative products that I think servicers and investors would like to offer to the borrower,” says Commerce Velocity, LLC, VP of sales Steve Sigaty, and compliance with the GSE requirements is one of the main reasons servicers cannot bring the newest technology benefits to their clients.
“There is a path you have to follow. You can’t be offering some creative loan modification if you haven’t even walked them through the HAMP process,” he says. “If you don’t have technology that can first prove that they did, or did not qualify for HAMP, you’re already at a loss.”
Another challenge is that there still are servicers who take borrower information on a spreadsheet, Sigaty explains, than the borrower calls back and gets a different representative who takes different information in a different spreadsheet. “How do you know which is the most relevant information?”
Technology can help, the problem is that servicers are so stretched out it is a challenge to stop and improve the processes they already know are broken, he adds. “It takes someone within the organization to say: Is there a way to run them in parallel? That is the biggest step that more servicers could take.”
According to Sigaty some have successfully done it by routinely updating heir systems three, four, or more times a year. Others are still running processes that were already broken a year and a half ago. So switching to more creative processes becomes a daunting and sometimes costly endeveaur.
Meanwhile compliance pressure is on.
For example, the implementation of government assistance programs such as most recently the Home Affordable Unemployment program, requires servicers to analyze borrower information, place them into the program and expect them to return within 30 days for a re assessment that may result either in a loan modification or a foreclosure alternative.
The later is one of the more “out of the box” options provided through government programs, Verma says, which are better structured than the initial programs that did not properly address the dynamics and the complexities of the borrowers’ financial situation.
“What we have learned from that is that you have to have a bag full of different resolutions fit for every situation out there –compared to the cookie-cut approach of the early days.”
Here is where technology can help to quickly find a resolution that is amicable, he says, such as the deed-and-lease program that allows servicers to lease the home to the borrower and continue to collect the cash flow.
In some cases regardless of a modification the borrower may not be motivated to pursue homeownership, or the investor is not willing to bring the principal payment down, “so you need a resolution for every situation” and the right technology to support it.