Government Mod Plan Is at Top of Hot-Button Issues
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 a number of other hot-topic button issues. In this second of two excerpts from the roundtable, the participants start by talking about transparency.
Participants on the panel included 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.
Frank Liddy: I think we're at a critical week. If you look at the Geithner-Donovan letter to the top 25 servicers, there's a clear set of actions - and I've been in banking for over 20 years, I've never seen a letter like this, that says a plan of action is due in Washington on the 23rd, there's a briefing obligated on the 28th and there's going to be public reporting at the services level of all of these activities starting on the 4th. So the amount of the political pressure that's being applied here I think is without precedent in the mortgage industry. To your question, could this be done in two years? To me it's four things you have to think about. The simplicity, I think 4 C's. First off is the clarity and getting clarity around the guidelines. The second is building what I'll call the competency within the servicing community around how to do this. The third is around how do you build the capacity out and ultimately, how do you do all three of those with not an implied, but with an absolute commitment to optimizing the outcome for both the homeowner and the lender? And the servicer is obviously caught in the middle of that conversation, but there has to be, not just an implied commitment, but an absolute commitment to optimizing the outcome for each party. If we don't go that way as an industry, then we run the risk of repeating the failures of the past. But to me it's clarity first, it's competency, capacity, and then the commitment to carry this forward.
Robert Mackey: And clarity is, I think, what they're struggling with.
Frank Liddy: And we're in the clarity state right now. As clarity gets refined, competence will be built out. Now as someone in the outsourcing community, I find it very interesting that as we all go through the stages of clarity definition, we're all learning this through. But when I think about where outsourcers can play a role here, it's clearly on the competency side to bring in both originations and servicing experience and expertise. It's clearly capacity, although I would say there's going to be a lot of questions about do you outsource this work to a provider that takes it offshore? So as a provider, I've been very conscious of architecting our outsourcing solution from the industry and saying, everything we will do for the industry will be 100% onshore. So I think that overcomes a lot of concerns, considerations about who is going to be doing the work. But if there was ever a perfect storm for a true collaboration between the outsourcers and service providers to get at this necessary commitment to optimizing the outcome, this is it. Is it going to take two years or five years? I don't think anyone has that answer. I think we're going through a 10-year process though. As these loans are modified, they'll have to be serviced differently on an ongoing basis. The level of reporting back to the government will be without precedent and I think we all have to think about it, in an industry, how do we remove these loans from the general population of servicing and think about what kind of new prescriptive or servicing platform we want to put them on.
Robert Mackey: Another bramble is how high and how long are we going to be suffering with the unemployment situation? That's going to add to the problem. Another conversation I had recently is - and this is part of the initial establishment of this process - Treasury is going to be auditing how the services are doing and then it's going to be another interesting ...
Frank Liddy: Auditing, but publicly reporting, so if there's a monthly report coming down with a by-date listing of servicers and who's doing what in terms of volume and/or what's the success rate, I mean this is pretty visible stuff.
Robert Mackey: The Treasury is gearing up, too. As the servicing industry has to prepare and engage in this, I talked to somebody this morning that discussed with Treasury an audit and they asked Treasury, "Do you have a scope?" And they said, "No, we don't have a game plan yet. So when we come in to look at you, we can't tell you how to prepare for this."
Chris Saitta: Certainly unemployment rates are a concern, but we also have a foreclosure moratorium in place and when that lifts, significant volume, possibly enough volume to affect real estate pricing, is going to hit the market.