Analytic Tools Help Understand Default Scenarios
In order to avoid foreclosure lenders are using technology as an analytic tool to understand each default scenario.
Technology is driving default resolution strategies to help servicers create custom loan packages or forbearance plans for borrowers.
With numbers increasing in certain areas of the country, defaults are on every servicing agent's mind. Decision models can be used to determine the best option for the borrower such as a loan modification, a deed-in-lieu, or possibly a short sale.
In foreclosure, an attorney interface system via the Web can allow all parties involved in the default process to share images of files and important documents like copy images of the original deed.
Realizing that it can often be more cost effective to bring the borrower back into good standing rather than foreclosure on the property, companies are creating tools to re-evaluate the borrower's current standing and develop a new structure for their loan. Duke Olrich, president and chief executive officer of DRI Management Systems, says his company's loss mitigation tool provides an online analysis of foreclosure vs. other user-defined loss mitigation approaches including pre-foreclosure sale, deed-in-lieu, or short sale.
"A servicer and investor will probably lose $35,000 to $60,000 on every foreclosure, which is why they try and mitigate a loss," said Mr. Olrich. "The basic approach used to be, if someone wasn't paying, a collector would hound the borrower to get the money out of them. Now, Fannie, Freddie, HUD and VA have taken different approaches. They are saying, 'How can we take a potential loss and cut that in half or a third, or do away with it altogether.'
Documents are e-mailed and sent for borrowers to sign and be notarized before the loan modification. A real estate broker who specializes in a particular neighborhood will likely conduct a broker price opinion, which is far cheaper than an appraisal.
A BPO normally costs $80 and compares three existing sales for similar properties.
Servicers are getting more sophisticated, adds Mr. Olrich. They may use an AVM or automated value model. (c) 2006 Mortgage Servicing News and SourceMedia, Inc. All Rights Reserved. http://www.mortgageservicingnews.com http://www.sourcemedia.com