Central Database and Analytics Helps Borrowers

Hope Now, the nation's largest partnership of government, private and nonprofit entities, is proving this strategy is one of the most efficient ways to assist those who are suffering from the subprime mortgage crisis.

The reason, executives say, lies in the combined benefit of creating a centralized database with several layers of information and the ability to thoroughly analyze it so members can make informed decisions before taking action.

"Partnership is essential right now and that's exactly what Hope Now is - a unique partnership between private business and government entities," said Bob Caruso, Bank of America national servicing executive, at the SourceMedia Mortgage Servicing Conference here.

"It is all about creating an essential partnership ... and businesses working together can make changes happen quickly."

Mortgage servicers and the industry at large are concerned and keenly aware of the impact the current economic distress has on customers, he said.

So private involvement in the Hope Now alliance pulls from different areas counselors, servicers, investors and other mortgage market participants.

Hope Now members also partnered with Computer Sciences Corp. to develop a counseling portal to help nonprofit credit counselors reduce mortgage foreclosures, he said, creating a portal that functions as an extension to the consumer lending default management software used by many mortgage servicers.

It allows servicers to share loan data with counselors and helps generate workout options that are consistent with servicer loss mitigation guidelines.

Hope Now was initiated by the Department of the Treasury and Department of Housing and Urban Development, which was essential in bringing such a diverse group together, Mr. Caruso said.

Moreover the Office of the Comptroller of the Currency now requires banks that service mortgages to provide comprehensive data that help all parties see "a clear picture of the entire market" and adds to the foundation already laid by Hope Now.

"Partnership allowed both the OCC and Hope Now to each modify their metrics and develop one consistent data set that meets the needs of both groups," Mr. Caruso said.

"The government backing of Hope Now really facilitates that type of collaboration with other government entities."

During recent testimony before the House Financial Services Subcommittee on Housing and Community Opportunity, Hope Now executive director Faith Schwartz said members are working to develop new methods and programs to assist at-risk homeowners.

New data acquired in the recent past through a multitude of lender, servicer and counseling agency sources have helped Hope Now efforts to reach out to at-risk borrowers and to help homeowners avoid foreclosure.

For example, Hope Now data show servicers provided nearly 1.2 million loan workouts between July 2007 and February 2008 of which 48% were workouts for subprime loans, or more than double the 2007 rate.

According to Mr. Caruso, the Hope Now hotline operated by the Homeownership Preservation Foundation has received over 140,000 calls during the fourth quarter of 2007, or 10 times more calls than during the first quarter of 2007. Trends from the calls show that homeowners are reaching out for help earlier, he said, as 31% of those who called during fourth quarter of 2007 were less than one month behind in their mortgage payments, which makes it easier to avoid foreclosure at that early stage.

"Bank of America is seeing that letters sent on Hope Now letterhead achieve a better response rate than other loss mitigation mailings," he said. "That's an advantage of speaking to homeowners with one voice."

The average response rate to BoA's Hope Now mailings in February was 22% and again the best response is from homeowners in the earliest stages of delinquency.

Mr. Caruso believes businesses are involved because the ripple effect of foreclosures impacts not just home values, but also impacts the well being of communities.

For instance, he said, Bank of America is taking a holistic look at the situation, not as a mortgage servicer, but as a financial services institution.

"It takes more than one entity or one solution to help customers in distress. Each step builds on the work already done." A more targeted approach and proactive effort can help. Options like Project Lifeline enable homeowners to "pause" a foreclosure while a potential loan modification is worked out.

"This extra time will make the difference and allow them to avoid foreclosure," he said.

"Hope Now has a strategic three-pronged approach to helping troubled homeowners avoid foreclosure, which includes reaching out to the borrower, counseling the borrower and partnering with them to help find a realistic solution to avoid foreclosure," Ms. Schwartz said.

The goal is to create a unified, coordinated plan.

Mr. Caruso recalled how the Hope Now concept was born in August 2007 in Washington in a meeting called by Treasury. He was one of the representatives asked by Treasury secretary Henry Paulson to participate with "ideas on what we could all do together" to help with the foreclosure crisis.

"Our belief was that some customers may not trust their servicer or lender, but would be more open to talking with a nonprofit credit counseling agency," he said.

"And, on a practical note, nonprofit counseling agencies also have the latitude to reduce or restructure unsecured debt based on delegated guidelines they receive from credit card and other unsecured lenders. That gives counseling agencies the ability to improve a customer's cash flow to a level we, as servicers, cannot."

More specifically, Mr. Caruso said, the goal is to reach distressed homeowners with appropriate alternatives.

"We have a responsibility to explore all of the options."

He believes "it will take more time and more effort to turn the tide." Hope Now however has proven to be a success with both customers and the mortgage industry at large.

According to Mr. Caruso if until now the partnership has been open to a select group of chosen organizations, currently, the biggest complaint coming from the mortgage industry relates to Hope Now membership. The number of organizations interested in becoming members is growing every day. Nonprofits and customer credit counseling agencies are among those approaching the partnership with membership aspirations. In the future Hope Now plans to expand. (c) 2008 Mortgage Servicing News and SourceMedia, Inc. All Rights Reserved. http://www.mortgageservicingnews.com/ http://www.sourcemedia.com/