REO & Foreclosure Management

With moratoriums on foreclosure starting to expire in the region affected by Hurricane Katrina, lenders are preparing to move into uncharted territory. How do you respond to a catastrophe on such a broad scale that affects hundreds of thousands of homeowners?

That issue is a key one on the minds of servicers attending this year's MBA annual national mortgage servicing conference. But it's not the only reason lenders need to be mindful of default management and property disposition issues. As the regulatory environment becomes more restrictive, lenders are finding that their default management practices are under greater scrutiny. And with real estate markets starting to cool down in some areas, selling real estate-owned may become more challenging as well.

How lenders cope with what may be a rising foreclosure workload remains to be seen. But we're betting that technology will play a key role in helping lenders manage the tasks more efficiently than in the past. While default management remains a "high touch" part of the mortgage business, good systems and workflow are being employed to make this side of the business more productive than in the past, as well as to monitor results and ensure compliance.

So far, delinquency rates have remained relatively low by historical standards. But as the huge volume of loans originated in 2003 and 2004 continue to season, rates may start to rise. Add to that the impact of rising interest rates and the proliferation of new, some say "exotic" mortgage products, and you could have a recipe for higher defaults.

We hope that credit quality won't deteriorate in the mortgage sector. But any prudent lender wants to be prepared in case defaults do start to rise. And the time to start making preparations is before the you-know-what hits the fan.

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