HAMP Effort: It's Early Days Yet
Dallas-Servicing industry specialists came together at the SourceMedia Best Practices in Loss Mitigation Conference here to discuss the latest developments in the president's plan on loan modifications, as well as the hot topics of hiring qualified loss mit consultants and getting them trained to handle increased volumes of defaults. The roundtable attendees also discussed current strategies to dispose of real estate-owned assets and how technology is helping servicers in the pre- and post-foreclosure process.
Participants on the panel included (from left above) Rich Rollins, CEO of Infusion Technologies; Ron Morgan, CEO of Sterling Home Retention Services; Chris Saitta, CEO of REOTrans; Greg Hebner, president of MOS Group; Frank Liddy, vice president of Genpact; and Robert Mackey, director in servicer evaluations, Standard & Poors.
MSN: How do you think HAMP is going so far and if you don't think it's going all that great, how can it be made better?
Bob Mackey: It's funny you ask that question because I see a lot of the servicers that are involved in this plan. For the most part, their initial comment is that it's really too soon for them to really know. I think the first payments made - the first trial payments made were mostly in May, so now it's getting through that first cycle. The biggest issue might have been staffing up even more than they had, because when the bell rang in March, all the phone calls were received from current borrowers. One of them told me this morning already they are being asked the same question: Do you have any suggestions on what we can do to improve this? Also, I've been told it changes a lot. The initial procedures were set forth but then there's been a lot of fine-tuning along the way.
Frank Liddy: If the unit of measure is a question of how many modifications have been completed and then of those, how many have been modified and are now current or in a paying status, I think from the government's perspective, it's falling short of the goal. From the servicer's point of view, I would say its early days. Servicers were never on task at an industry level to do underwriting and risk management and rewriting loans. When you have two conflicting perceptions, obviously it creates a lot of confusion in the marketplace. And when you think about the stress on the balance sheets of so many of these institutions holding this paper, the only thing more stressful than that is probably the stress at the kitchen table of all these borrowers trying to figure out how to stay in these homes. At the end of the day, the ultimate perception, the ultimate test will not be determined by the industry but by the government and more importantly the homeowners that are trying to work in good faith. To put it in perspective, the first-quarter numbers that came out were only 138,000 loans that were modified. The bulk of those were by two or maybe three of the top five servicers. That represents less than 20 basis points of the whole population of mortgages in the country that can be modified and or refinanced. So, it's very early days in that regard.
Greg Hebner: I think the overall design of this plan has a lot better chance to be successful than what we've seen previously. For 2008 and everything we hear about redefaults, there weren't really modifications. The payments stayed the same or were rising. What we're seeing today at least in the trial period, we're doing a lot of these, literally thousands a month, is you're seeing really substantial decreases in payments, 30% to 50% is not uncommon. When you take a $200,000 mortgage from 6.5% to 2%, extend the term from 30 years to 40 years, you're going to see substantial savings. So the chances of the borrower who is struggling to make a $2,000 mortgage payment, to make a $1,100 mortgage payment, I think the opportunity to see a much higher success rate is there. I think what was missed and not being privy to how much interaction between the major servicers and the government happened prior to roll out is, as Frank said, there's a lot of complexity in this process and it is really a challenge to balance resources with demand.
MSN: Are servicers having trouble staffing up to this demand?
Robert Mackey: A huge, huge problem. You've got to hire people, you've to train them, you've got to do call monitoring, you've got to train them again. And like you said, the guys that haven't been originating loans, they're busy with refinances and it's very, very difficult. But I've talked to people in the last two weeks that have to hire - they're hiring hundreds. I don't know where they're getting them, but they're hiring them.
Greg Hebner: They're not getting them from the mortgage business, unfortunately. The challenges are getting hundreds of people who don't come from the mortgage world, not only do they have to be trained on this process, they have to actually be trained what's an ARM, what's a fixed mortgage, what's an escrow?
MSN: How do you make a better choice? How do you outsource in a way that you find the best third-party servicer for what you need?