Act with Caution

Mortgage servicing these days resembles a huge construction site of ideas, many of which have a lot to do with purchasing nonperforming loans. How do we stop the complex domino effect of mortgage defaults and foreclosures on the economy at large through long-term efficient regulation and loan modifications?

Investors like Residential Credit Solutions, Los Angeles, appear to be reasonably cautious in a constantly changing marketplace. Despite the Obama administration's goodwill and efforts to ease the crisis, both in housing and the economy at large, new regulation and the Troubled Asset Relief Program have generated hope as well as a paralyzing wait-and-see response from both buyers and sellers.

Waiting they may be, but servicers also are coming up with loss mitigation solutions, technology tools and borrower information. Silverstone Investment Group has come up with a do-it-yourself loan modification DVD for homeowners in distress that makes the process more affordable and easy to understand. It is a convenient tool considering how over half of all homeowners in default or foreclosure never contacted their servicer. Even one DVD can help improve the quality of a nonperforming loan and make it easier for the holding bank to sell it to those cautious investors.

Investors of whole loans as well as securities' investors are cautious about where they place their funds. Delinquencies in the residential marketplace have long affected securities investors. Now CMBS holders also are concerned. Loans secured by large-size commercial real estate properties are now at risk of default, so both investors and ratings agencies, which have been blamed for lack of hindsight, carefully review their predictions. Finally, as the crisis turned global, Dublin-based Research and Markets recently published a world guide on performing and nonperforming loans with reports on countries ranging from the U.S. to Vietnam.

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