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Default Servicing

Every time you turn on the news or open a newspaper, there's a story about another big company laying off employees. People working in the financial services sector, and that includes you, have borne the brunt of much of the downsizing. Fortunately, the servicing sector is one part of the mortgage business where companies are still hiring - and they are looking for people with default management expertise.

It's a sign of the times. With housing markets varying between distress and collapse all across the country, default servicing is a boom business in a weak economy. And judging by recent data, the boom is likely to last for a while. Few economists expect housing values to begin recovering until at least late this year. Some believe the downtrend will continue to play out for several more years before a bottom is reached.

The Federal Housing Finance Agency, overseer of Fannie Mae and Freddie Mac, reported that despite a growing loan workout volume, serious delinquencies on agency-backed loans continued to increase last year. Whereas once Fannie Mae and Freddie Mac boasted of some of the lowest credit losses imaginable, today they are in government conservatorship because of the impact of the housing market's collapse. In November 2008, 2.73% of the GSEs' home loans were 60 or more days past due, nearly double the overdue rate from March.

And most mortgage servicers would envy that figure. Loans held in portfolio by banks or securitized into private-label transactions by Wall Street are performing much worse. Recently, one ratings agency reported that some 30% of loans with mortgage insurance outstanding were originated in 2007, which is turning out to be a vintage that remains problematic because of loose underwriting standards. It will take a lot of time to work through the mortgage industry's current credit woes. But the process of doing that makes default servicing a hot field right now.

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