Ocwen Sees Signs of Hope
New data suggest a subprime market turn around may be around the corner.
Subprime mortgage servicer Ocwen Financial Corp. reports delinquencies on its subprime loan portfolio "flattened or declined this summer, in large measure due to its technology-enhanced loan modification program."
In addition, the company credited a proactive outreach that helped keep homeowners in their homes and continued to generate income for lenders and investors.
"While it's still too early to signal an end to the subprime mortgage crisis," Ocwen president Ronald M. Faris said, "this represents a welcome reversal of spiking delinquencies."
The company called the finding "a ray of hope in the subprime crisis" that suggests this type of practical approach helps protect homeowners, lenders and investors.
Ocwen reported delinquency rates in every category (60, 90 and 90-plus days) have either declined or remained flat over the last three months.
"This is the first sign of stability in Ocwen-serviced loans since the inception of the subprime crisis in 2007," the servicer said, which is representative of the market at large since Ocwen subsidiary, Ocwen Loan Servicing LLC, services approximately 350,000 mortgages, about 85% of which are subprime.
Mr. Faris said Ocwen's loan modification program helped prevent foreclosures through a sophisticated approach to modifying loans and a commitment to loss mitigation that has resulted in win-win solutions for all parties in the mortgage chain.
"We believe that by preventing foreclosure, we create win-win solutions for everyone - the homeowner is able to stay in the home and lenders and investors continue to receive income."
Since August 2007, Ocwen achieved loan workouts and avoided foreclosure for over 58,000 homes, said Margery Rotundo, Ocwen's senior vice president in charge of loss mitigation operations.
"Assuming the average household we serve is 3.5 persons," she said, "in just one year we've helped keep the roofs over the heads of 200,000 Americans, the equivalent of a midsized city like Richmond, Va., or Modesto, Calif. We are very proud of our contribution toward the preservation of homeownership for so many families."
Properly implemented loan-mods "benefit investors in MBS trusts in transforming a nonperforming asset into a cash-flowing asset again," Ms. Rotundo said. "Foreclosure is the worst alternative."
Ocwen loan-mods have helped change loan terms and reduce interest or principal payments, assist borrowers at risk of default through forbearances and payment plans that change the payment schedule but do not change the total amount of the loan.
Ocwen said part of the success also comes from early intervention and proactive initiatives to help homeowners in distress - and a 65% increase of its home retention consultant staff during the past year.
Plus, technology allows for an analytic approach to each individual loan. Loan-modification technology has allowed for processing tailored to the specific facts and circumstances surrounding the homeowner's financial situation, the terms and conditions of their mortgage loan and current value of the property.
The company uses proprietary tools that help determine "whether a loan modification would result in cash flow to the investor that exceeds the likely liquidation proceeds from a foreclosure and the homeowner's willingness and ability to stay current on the new modified payment," Ocwen said.
Ocwen endorses both the Hope Now alliance servicing guidelines for foreclosure prevention as well as the loan modification program recently announced by the FDIC for mortgages serviced by IndyMac Federal Bank and works with various nonprofit groups on foreclosure prevention and homeowner outreach projects.
"The FDIC is setting a useful precedent for the industry," Mr. Faris said. "We have previously adopted many of the same features in the IndyMac loan-mod program and are incorporating other aspects as well." (c) 2008 Mortgage Servicing News and SourceMedia, Inc. All Rights Reserved. http://www.mortgageservicingnews.com/ http://www.sourcemedia.com/