Roundtable: Time To Prepare?

David Van Ess, EVP, LOGS Network

Mary Hunter, president & CEO, Artemis Enterprises

Joe Dombrowski, Fiserv, executive consultant

Jeremy Pomerantz, SVP, Nationwide Title Clearing

Joe Lanzillotta, VP, DST Output

These executives participated in a roundtable discussion at the SourceMedia Mortgage Servicing Conference in Dallas in June. Below is an excerpt from the discussion. The roundtable was hosted by Mark Fogarty, Ted Cornwell and Jennifer Harmon, editors of SourceMedia mortgage publications.

Ted: There have been a lot of challenges in the subprime end of the lending industry and I'm wondering how servicers and their business partners are responding to concern about increasing delinquencies and payment resets.

Jeremy: What we are noticing if the servicers are still around, they are preparing for an avalanche of ARM resets in the near future by auditing what is on their systems making sure the correct index rates are being used, the correct reset dates are there and the correct terms are there. I'm not necessarily seeing servicers preparing for mitigating inability to pay at this point, which would be interesting to see how that unfolds. In terms of the subprime fallout, it really depends on who the servicer is. Some are really reeling from not having prepared, and some are well diversified, so they are mitigating risks without having been too heavily impacted.

Joe Dombrowski: Some of our folks are rapidly ramping up from an employee standpoint, anticipating that there is going to be that avalanche of resets and the inability to continue in those products for some people. They (servicers) are really struggling to find people with sufficient loss mitigation backgrounds to deploy readily. Also, they are really struggling to find people with a sales background. Why they can't reuse originators, I'm not certain. But that's more of an editorial comment on my part. Trying to get the warm bodies in front of the phones is a real challenge. Just having enough people and justifying the cost ahead of the event is a real challenge. How do I calculate an ROI for something where I don't know the dimensions? In servicing, as you all know, margins are thin. And I don't want to overstaff if it's not necessary. So how can I staff or re-educate existing staffing to get that done is a big challenge.

David: I can tell you that from the law firm perspective, we are cranking up, hiring new employees to really focus on loss mitigation as a service to the servicers and to really focus on being true partners with the servicers. We understand and always have that ultimately the servicers and their partners don't want the property back anyway. So if we can help them along with that path and ensure that property is preserved in the hands of the homeowner, we surely want to assist in that regard. So we are hiring more employees. As a result, it's calling for a lot more training. It used to be just "what's the reinstatement or payoff?" Somebody would ask another question only upon their solicitation, and then we'd send them over to the client. Now, we take a much more proactive position and do some prescreening depending upon what the clients allow or ask us to do and actually assist, and hopefully we are bringing some value to the lenders. Secondly, it has actually allowed us to interact with the clients a lot more. For a number of years it has become such that technology - and technology is good - effectively limited the personal contact we would have with both mortgagors and mortgagees. And because a lot of times the client's directive was to "just put it on our system, send us an e-mail," we really didn't get a chance to speak with clients. And I know the reverse is true as well. "We can't get a hold of anybody at the attorney's office." So sometimes it's difficult to get a response back from the client because they were waiting to get the input from the system. And I think it has been positive in that regard that we are able to work closely and on a more personal level with the servicer.