Problems with HAMP Mods As Rules Keep Changing
Dallas-At the SourceMedia Loan Modifications Conference here, presented by Mortgage Servicing News, servicing industry specialists gathered together to share what they are seeing first-hand in the trenches regarding the latest on handling HAMP guidelines and what servicers are doing to keep borrowers in their homes.
The following excerpt features from left, Jay Loeb, vice president, National Creditors Connections Inc.; John Savage, chief technology officer, Bridgeforce Inc.; Paul Wright, SVP of sales and marketing, DRI Management Systems; Dave Zakutny, vice president, product development, Foreclosure Management Co.; and Bob Yeary, chairman and CEO, Reverse Mortgage Solutions.
MSN: Modifications seem to be the most important focus in the servicing space at this point. Are there any specific issues in the market that need immediate attention now? What solutions are you seeing that help create more efficiency?
Paul Wright: From a customer perspective, we see something different almost every week depending on who we are speaking with. I think it's Washington that is driving a lot of that. New memos, new things are coming out every week in regards to another stipulation that the servicer has to abide to. It's all new timeframes, new documentation. It has to be back and forth between the borrowers and their attorneys. They are looking at HAMP. HAMP has what I call some limited successes.
You're seeing a lot of first-time mods failing, doing them again and having the second time around also failing. That's how far we've come into the process. I see a lot of my clients taking a better look at short sales, because it may be a better track for them. However, some of them think of short sales as a way of just postponing the inevitable and giving the borrower even more time in the house without making payments. There is a lot of conflict in regards about what is the best thing to do and how do I do it?
From our perspective, our clients say if you have the right information and if they can actually make contact with the borrower and find out what their financial capabilities are quickly, they can quickly determine if they need to spend much time on whatever path they've chosen for this particular borrower. And then you have the whole other backend side of this. Once it's mod, or once it goes short sale or REO through the foreclosure process, how do I properly close it and get it closed quickly? We've investigated some national closing organizations to help our clients get that data and the documentation where it needs to be so that title can be picked up and so forth.
MSN: Will size matter in this? Will smaller shops be in danger?
Paul Wright: I think there are some niche-outsourcing-type companies out there who understand what is going on and can act quicker. Not to take anything away from the big five commercial banks, but a lot of them have processes in play almost like the Titanic. Even if they have the automation, the process itself to be able to change as quickly as Washington wants them to do even makes them in more jeopardy now. You can take the bailout money and the controls, but my big clients are just as much in trouble from a standpoint of feeling crimped, as my small clients are, and I think their interpretation of what is coming from Washington is the thing that confuses them the most. They are really looking for help not only from DRI but any third-party partner they may have within this space. It's been an interesting ride the past six months especially.
John Savage: Before HAMP came along and even before the FDIC, we helped several clients put together their whole loss mitigation departments, train that staff and put together their first sets of treatments as housing prices started to fall. What's interesting, the thing that HAMP ignored was where is the customer going to be from a cash position afterwards? What has happened is we are modifying a lot of accounts, and they still have negative cash flow, they still have debt-to-income ratios north of 75%. They have a snowball's chance in Haiti of sticking to those mods. The challenge is if I only can get maybe 25% of the customers to actually qualify for HAMP, and a lot of those don't stick, what am I doing with the other 75% of the mortgages that I need to modify. I think that's one of the biggest challenges. A lot of the organizations have put everything into the HAMP bucket.
The requirements are constantly changing and you can't keep up with that process, but some of the other treatments, we have started to ignore. So, short sale, reverse mortgages for customers of that age group, some of the deed-in-lieu, which was a great sale, trying to refine the processes associated with ... a lot of these properties have second liens. They started to go down the path of trying to put processes in place to help streamline that whether you're a second or a first with a second to try and assist in that negotiation between the other lender. A lot of that is all gone by the way side because they are having to put all of their effort on these never-ending, never-shifting requirements for HAMP and for 2MP.
Paul Wright: ... with limited results, very limited.
MSN: Is that going to be the next big cycle ever, non-HAMP or every other loan that people ignored so far?