New Tool Helps Servicers Manage Problem Portfolios

Default management service provider LandAmerica Financial Group Inc. has released a new tool designed to assist lenders and servicers manage "problem loan portfolios," improve overall profitability and better mitigate risk, the company, located in Richmond, Va., said.

Using the eZLoss Mitigation tool, lenders and servicers "can outsource all or part of their loss mitigation processes, including skip tracing, hardship packages and various workout options," the company said.

It is delivered through LandAmerica's mortgage subservicing subsidiary, LoanCare Servicing Center Inc., and powered by the LandAmerica Web-based default management platform, BackInTheBack, an application structured to gather and process for investor-use data supplied by mortgage customers, credit rating agencies and other sources.

What makes it unique, according to LoanCare Servicing Center president, Gene D. Ross, is the way it filters the data "through the rules of the investor." While it basically provides a pass-fail evaluation, depending on the severity of the financial hardship an individual borrower is going through, it may come up with more than one workout option. Moreover, the evaluation process also uses various indicators including property value or appraisal, before it provides a remedy solution.

"It takes the emotion out of the process to ensure accuracy of the information taken mostly from third-party sources," he said. "We verify the information given by the customer."

Sometimes customers make unintended mistakes due to lack of understanding of the process, so to ensure accuracy at the back of the application form there are "questions only a specialist can review and answer."

To facilitate the data filing process, customers have the option to send in their financial information either electronically or over the phone. Company experts review the data aiming to find the best loss mitigation solution, he said. "What we want to do is everything possible to avoid foreclosure."

In addition, he argued, because the application is well structured in its process, it is more streamlined and quicker in means of inquiry and resolution. "It removes a great deal of judgment and emotion allowing for a conclusion that is more objective.

"LoanCare is a subservicer, so we offer servicing A-to-Z," Mr. Ross said. "It means from the time we put loans into our system, to the time it is paid of and re-released, and everything in between. eZLoss Mitigation allows us to just offer a loss mitigation to a client without the other services to the left of it and to the right of it. That is very unique to this offering."

It means, he added, "We're not saying in order for us to do loss mitigation we need to do everything else." The new tool has been specifically designed "so we can solely do loss mitigation for the client."

Efficiency and lower processing costs is another eZLoss advantage. Upon the launch, Mr. Ross noted, "Effectively managing problem loan portfolios without adding employees is a growing challenge for mortgage lenders and servicers across the country. With eZLoss Mitigation our clients receive the support they need to manage delinquencies, while enabling them to reduce fixed costs and boost overall profitability."

In the current mortgage market crisis, he said, nearly everyday financial institutions disclose their problems and in the most extreme cases they are going into bankruptcy.

"We also see that a number of structured financings that have been disclosed by Wall Street firms are having valuation problems and clearly experiencing performance stress," he said. "Therefore, there is a need for companies to provide loss mitigation expertise as one mean of trying to get the homeowner to re-perform on their loan. And most importantly for financial institutions to minimize the amount of loss that they could incur on these delinquent mortgage loans."

Apparently outsourcing and subservicing is a good way to do exactly that. LandAmerica acquired LoanCare in 2004. LoanCare subservices for various mortgage companies, banks and other financial institutions "on a private label basis," Mr. Ross said.

LoanCare is part of LandAmerica's long-term business strategy.

LoanCare started operating in the marketplace in the 1980s. Loss mitigation is just one area within default, he said. LoanCare covers the whole spectrum, such as collections, hardship packages, bankruptcy, foreclosure, REO disposition, "all of which are elements of default.

"However, our emphasis is on the loss mitigation side because we want to exercise every means for the customer and the client to avoid foreclosure. In fact, if a loan is going into foreclosure we will continue to provide loss mitigation until we have exhausted all our resources."

The new eZLoss Mitigation is another addition to LandAmerica's menu of services for clients experiencing delinquent loans who need loss control and reduction solutions.

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