Servicers Busy Ramping Up on Loss Mit Hires

Dallas-Servicing shops are seeing a dramatic increase in new hires and loss mitigation training in order to handle capacity issues. This is what speakers said on the panel, "In the Trenches - What's Working and What's Not," at the SourceMedia Best Practices in Loss Mitigation Conference here.

Stephanie Lowe, vice president, special servicing loss mitigation, GMAC Financial Services, said her company has added over 500 employees and developed a technology system in-house to deal with bulk decisions. She said many shops are migrating large numbers of staff from other products, including in-house processors, to early stages of default. These employees are being trained while the companies work on technology advancements.

There is no shortage of excellent originators who have the skill set to deal with delinquent borrowers, and servicers are capitalizing on that talent pool, added Scott Gillen, vice president at Stewart Lender Services.

"A lot of re-tasking is being done, especially now that refis have leveled off a bit," said Mr. Gillen. "No one wants to let anyone go."

The panelists touched on the fact that borrowers need to be educated more on what documents need to be included under the Home Affordable Modification Program. In today's market, a lot of borrowers are leaving out certain financial information because they are afraid.

"We have to work on the psyche of the borrower. They need to be active participants and know we are not out to get them," said Mr. Gillen.

While capacity is a huge issue, it appears that servicers are focusing a great deal of their efforts on borrowers who are current but could go into default. Javid Jaberi, vice president of national servicing for Fannie Mae, said if a current borrower calls in who is in financial difficulty or who is struggling to make a payment, that is the borrower the servicer needs to stay connected with. It is imperative that servicers learn more about the borrower's financials and challenges in order to find the right remedy sooner. "Effectively engage the borrower and follow up. Set expectations and follow up. As the account gets more delinquent, the borrower often stops calling the servicer," he said.

The Fannie Mae executive said it's important to properly train staff but admitted that with all the new government programs challenges arise. New employees fresh from college but with no practical experience in mortgages can take a long time to train, he said.

During the panel, "Life After Loss Mitigation," Rob Bridges, general counsel and vice president of operations at the auction firm of Williams & Williams, said the company's clients are expecting to see a dramatic increase in REO from August through the first quarter of 2010.

Jeff Freud, founder and owner of LoanMarket.net, said a couple of large asset managers and hedge funds are talking about buying apartment complexes and moving borrowers out of homes and into the apartments. "This way they can dispose of the REO asset quicker and easier. It seems like the favorable idea is to get them in as a renter," he said.

Buyers from other countries and on the East Coast are buying bank-owned properties in places like Florida where they can pick up something bigger that is affordable. While there does not seem to be any financing alternatives right now for first-time buyers, FHA is lessening their restrictions to try and get more end-users rather than the investor buyer.

The REO market needs better appraisals and BPOs based on current data. "If you are looking at the Case-Shiller report, you are looking at data that's 90 days old. In 90 days, you can be looking at a 15% reduction. And in some markets a 20%-30% reduction," said Mr. Bridges. "Trying to determine valuation all the way through the process is the biggest issue problem."

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