Pre-Approvals Give an Edge

Dallas-Pre-approval for a loan modification gives customers a much better chance of successfully going through the trial process and approval for a mod, Ken Scheller, vice president, home retention division, Bank of America, said during a panel at the SourceMedia Best Practices in Loss Mitigation Conference here.

He echoed remarks made by other executives who stressed the importance of "loan analytics" and risk evaluation at the front end of a loan modification.

The process is affected by very low customer outreach rates, which often are as low as 1%. And the reason may be because lenders and servicers still can be intimidating to borrowers.

The executive said that among the biggest problems faced by lenders and servicers in today's market is that customers may be challenged by fear.

Customers may be afraid to communicate with their lenders and may lack knowledge about their options.

Sometimes borrowers prefer to communicate with their attorney instead of a servicer or counselor, because they value the one-on-one experience and the privacy it entails, he said.

Mr. Scheller also noted that when foreclosure is in the works there is a "sweet spot" in the first 60 days of processing before actual foreclosure when borrowers have a last chance to consider retention, and this window of opportunity can be better utilized to the benefit of the borrower when an attorney is involved.

Taking into consideration the mindset of the borrower helps lenders and servicers because the fear factor manifests itself in many ways.

Data indicate that customers face a very strong foreclosure fear, according to ForeclosureRepos.com, New York.

REO activity is expected to spike in the coming months "as foreclosure delays and moratoria implemented by various state laws come to an abrupt end," ForeclosureRepos.com said.

There is, however, a counter reaction to that fear as more people are willing to look for alternatives, as shown by attendance at teleseminars, workshops, interactive community meetings, and events held by reputable mortgage bankers and attorneys. Counselors teach residents foreclosure prevention and how to identify the company holding their mortgage, and how to navigate the legal process to achieve loan modification and renegotiate affordable loan terms.

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