Third Party Loss Mit to Stay for the Long Term
Capacity shortage and regulatory demands that continue to challenge the way mortgage servicers conduct their business have opened a permanent space for third-party loss mitigation providers. They are here to stay, insiders say.
"Loss mitigation is going to be a very work-intensive business for the next, probably three to four years, that's why you see a lot of third parties getting in," says George Schwartz, a former managing director for Bank of America with over 25 years of mortgage experience who earlier this year joined ServiceLink as executive vice president and division president of default services.
He sees loss mitigation as a big part of ServiceLink and a permanent part of the mortgage servicing business going forward, since it is in line with the current transformation of the mortgage servicing marketplace. "If you look back, it used to be that everybody did their own tax work, their own insurance work, and then eventually the realization hit that you needed skill to do it by people who are focused on it to provide high-quality work in those areas. It reduced costs," he said. "The same thing is going to happen on the loss mitigation side."
While some of these third parties are there for the short term, he said, ServiceLink is in the process of building and expanding their loss mitigation department for the long term. If in 2009 ServiceLink's revenue coming from its loss mitigation services is $6 million, Mr. Schwartz said he expects it to be 10 times bigger in 2010.
Depending on their business structure, servicers sometimes need assistance in one specific area where they have capacity issues, he said, such as short sales.
"We have clients that for them the only thing we're doing is handling their telephone overflow in the loss-mit area." ServiceLink answers the calls and informs borrowers about their status based on what the servicer is doing. For a client he did not identify, the company is responding to about 90,000 phone calls a month. Most need to face the challenge of compliance requirement changes. "We're expanding, but we're not competing with servicers for staff, we're doing it where it used be a loss-mit staff. ... It's a matter of having the right staff and knowing what to do with it."