Better Evaluations Help Increase Investor Confidence

Brookfield, WI-Challenges faced by financial services companies - from real estate-owned properties to technological and cultural barriers in avoiding foreclosures - include a need for accurate loan evaluations that can help increase investor confidence.

Bill Garland, senior vice president, Fiserv Home Retention Solutions here, believes the debate over how to use government assistance to avert the crisis also entails coping with one of the biggest challenges faced by the mortgage market today: loan evaluation.

"We're still trying to put our arms around how will 2009 look like," he said. "It is very difficult to project the bottom of the market even though I think hopefully we'll be successful in helping people retain their homes. If that's what they are interested in doing, or committed to do, they can. But there also are other factors going forward such as high unemployment rates and liquidity constrains."

He suggests more valuation sets would provide some economic relief to the investor, particularly in the private securitization market. Such tools can enable investors to measure the loss on a restructured loan.

"REOs are owned by the banks and investors are basically saying, 'What is going to happen to me here?' And I don't think we have an answer to that yet," he said. Currently, interest rates are low, yet mortgage money has been constrained because liquidity also is at an all-time low. Whether investors feel comfortable with the market or not under the existing servicing requirements, he said, the ability of the servicer to have a really active restructuring program with a reduction in rates and extension of terms certainly affects "bondholders' cash available for distribution through the waterfall of the trust by the trustees."

He sees a good start in the fact that the liquidity issue has started to be properly discussed when dealing with larger pools of mortgages. He noted the FDIC has stepped up efforts to find powerful models that help the industry to understand the impact of investors and other stakeholders in the securitized transaction. "It will also help deal with the vast amount of REOs currently in the market," he said, while government initiatives will empower servicers.

"The key ... and what is already starting to happen is have open communication and figure out what is the proper middle ground to work through this crisis," he said.

"We need to take the initiative to cerate some stabilization in the securities market and have some ample liquidity in the mortgage business to be able to meet the demand."

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