Servicers Stressed On Loan Compliance
New York-While servicers have been called to task for not doing enough loan modifications, most experts say it's not for lack of trying.
"Loan mods in general have been a very dynamic product set," noted Art Tyszka, director of product management at doc prep and compliance vendor Wolters Kluwer Financial Services, Minneapolis. "We did a lot of work around traditional loan mods before HAMP. From there, SMP rolled out and the administration killed that and introduced HAMP. We've been doing a tremendous amount of trial mods.
"The government had their performance report in July and we helped some big servicers do very well. With the 90-day lag between the trial mod and the final mod, we've been gearing up for that. We're waiting on the numbers to see which trial mods are qualifying for the full mod and have not gone back into default. I've seen numbers as low as 20% and as high as 70%."
Specifically, Wolters Kluwer helped servicers initiate approximately 14,000 trial modifications last month. To date, the company has helped servicers initiate close to 56,000 trial HAMP modifications. In the first half of 2009 Wolters Kluwer helped servicers do nearly 50,000 standard modifications.
"Servicers are doping everything they can to keep up," noted Mr. Tyszka. "There's a lot of pressure on servicers. They are being told that they are not performing as well as expected. From what I see, it's not for lack of want. Understand that servicing systems were not made to do this. Servicers are working overtime to create an origination platform on a servicing system.
"One of the difficult pieces of HAMP is that there are guidelines that are ambiguous. If you get six lawyers looking at this, you'll get six different opinions. I think having the administration mandate e-mods is a good idea. However, it will require changes to the product to support a simpler mod. To date, the 4506-T requires a wet signature, so even if everything else is electronic, that would require paper."
Will mods be simplified to make it easier for servicers to keep up with volume? "There have been discussions on how to simplify HAMP, but nothing is clear right now," answered Mr. Tyszka. "I think you'll see a lot of overnighting going on. I wish there were easy answers, but there aren't.
"Another complication is the fact that servicers are only going to be doing loan modifications for another 12 to 24 months. Do they invest in technology to do something that is short term? This isn't cheap. We encourage automation and want to see servicers go there, but it will be slow."
"Loan mods are e-origination for servicing," said Tim Anderson, president at SigniaDocs. "What we're finding is that consumers are having to re-apply several times and paperwork is getting lost. I can be online with the borrower and execute the loan mod right there. Also, the borrower is on the phone with the right person qualified to help them. Why automate this process? If you can't close that borrower, they'll shop around or just have second thoughts.
"If you can't qualify for HAMP, the next thing is a short sale. However, Treasury has required a new document be signed by five different parties before the short sale can be executed. How are you going to do that quickly in a paper world? The only way for that to go anywhere is to make that an e-signed document. You will never get all those people together otherwise. When it gets down to execution, because credit changes fast and jobs are being lost, there's too much time lost," concluded Mr. Anderson. "If you can't coordinate this electronically, it'll all fall through. This has taken doc providers into a whole new market."