A Change in Focus

People are always talking about paradigm changes in the mortgage business. In fact they come along so often they are almost a dime a dozen.

At the recent SourceMedia Best Practices in Loss Mitigation Conference, Scott Gillen, vice president at Stewart Lender Services, said, "We used to service people who were current on their mortgages. Now, we service people who aren't current."

While that may be exaggerating for effect, it isn't much of an exaggeration. With delinquencies and foreclosures off the chain, there are literally millions of people no longer current on their mortgages, with many more yet to come. Granted, many millions of people remain current on their loans, but all the energy in servicing currently is focused on those who are not.

So there is now a tremendous emphasis on loss mitigation on the servicing side. This involves both in-house people at lender/servicers but also, more and more, outsourced loss mit specialists who reach out to troubled borrowers and try to prevent them from going off the rails entirely. A big subset of loss mit currently is fraud prevention, as mortgage fraud is absolutely booming and criminal activity destroys good servicing every bit as effectively as borrowers who can't keep current due to adverse impacts like unemployment or illness.

Even the best loss mit effort can't prevent every loss, and once serious delinquency occurs lenders are using every tool in their kit to make them as low as possible. The sessions at the Loss Mitigation Conference showed that very clearly, starting with a short sales workshop in which both lenders and Realtors learned about the best ways to dispose of real estate before it hits the foreclosure rolls.

Real estate-owned sessions also saw lenders and Realtors huddling together to figure out the best execution on foreclosed property sales to get the best price for lenders saddled with REO on their balance sheets. When you think about it, this is a mini-paradigm shift all to itself. It used to be that Realtors and lenders worked together on the originations side. Now, Realtors and lenders are working together on the servicing side!

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