Counselors and Servicers Partnering

Dallas-Experts find continuous feedback between counselors and servicers before and after a loan modification is key to successful loss mitigation and lower redefault rates.

Suzanne Boas, president of Consumer Credit Counseling Service of Greater Atlanta, says one developing trend in the marketplace is that more servicers are engaging in data exchanges with counseling agencies as a first step in meeting investor requirements and ensuring long-term data transparency. Tom Deutsch of the Asset Securitization Forum also agrees that investors recognize the value of counseling in helping reduce loss in the securities markets.

Up to 46% of loans modified in the third quarter of 2008 defaulted, said Linda Simmons, general manager of mortgage finance solutions, Overture Technologies, Bethesda, Md. "If you decrease the payment by 20% the redefault rate is cut by 50%." So data feedback may seem like a simple request, she explained, but reporting is expensive. "The data is there, it's a matter of how to get it to CCCS or another counselor."

Overall mortgage industry interest in data transparency and ways how to reduce defaults of modified loans is growing, Ms. Boas says, and it is in teh process of eventually creating a better information exchange on how a loan is performing after the modification.

There are however a few data reporting problems. Data access is expensive, Ms. Simmons says, it is "a legacy system limitation problem" Data ownership is another issue. If a loan is owned by the GSEs data is in their system, which is not universally compatible. A more robust data exchange between foreclosure counselors like CCCS who help reach a modification agreement, and servicers, has proven to benefit borrowers as much as loss mitigation efficiency, she said. So CCCS is expanding its Early Resolution Counseling Portal platform pilot tested in partnership with Bank of America and Wells Fargo and designed by Computer Sciences Corp. It allows fast servicer-counselor data exchanges. After counseling is completed the portal analyzes data channeled into the system by the servicer of the loan. It screens specific lender and investor requirements so by the time a counseling session ends the counselor can show the borrower highly accurate workout options. If an agreement is reached it is immediately sent to the servicer for a quick decision. It streamlines the process so CCCS receives the same information normally used by loss mitigation staff at the bank. In May, eight counseling agencies are expected to join CCCS into the program, which as of now helps reduce processing and approval time only for workouts on BoA and Wells Fargo loans. "We are working with other servicers and also working with other nonprofit counseling agencies to train their counselors," Ms. Boas said. The goal is to reduce redefault rates.

Now everyone is facing the so-called waterfall effect, "but the tools are out there." Jay Meadows of Rapid Reporting also sees extensive counselor-servicer feedback as crucial to the success of a loan mod. To prevent and reduce the number of redefaults, he said, counselors need to know what loan modifications work and what do not.

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