Common Sense Approach to Loss Mit
New York-Common sense always prevails. CitiMortgage second-quarter foreclosure prevention data indicate a common-sense approach to loss mitigation is an effective way to overcome capacity issues.
A combination of aggressive borrower outreach through partnerships with free financial counseling providers, a 35% increase in loss mitigation staff, the implementation of Home Affordable Modification Program and improved technology enabled CitiMortgage to outnumber completed foreclosures with successful loss mitigation processing by more than 12-to-one, a ratio double that of only six months ago.
"The news is that roughly 12 out of 13 borrowers facing foreclosure have been able to stay in their homes," says Eric Eve, CitiMortgage senior vice president for global community relations, mainly due to the following reasons: "One, there's greater alignment with President Obama's HAMP; two, there's a very committed and much more aggressive loss mitigation effort undertaken by Citi; three, we developed and continue to develop significant capacity in the employees that we're hiring, the training we offer and the processes that we're improving."
According to Mr. Eve, borrowers in need of loss mitigation or foreclosure prevention at the end of the quarter represented less than 2% of all loans serviced by Citi. Yet, an upward trend in delinquencies and demand for workouts continues given a 4.7% increase in 90-plus-days past due delinquencies in the servicing portfolio for first and second mortgages during the quarter.
Citi reported a 29% improvement in total loss mitigation actions for borrowers serviced by Citi in the second quarter - in part thanks to the implementation of trial modifications under HAMP in addition to in-house programs.
These improvements, however, did not help increase the total number of loan modifications, which dropped 5% from the first quarter of 2009.
Mr. Eve says Citi is pleased with the quarter results and trying to improve them. Asked whether Citi has a specific goal in line with the Nov. 1 industry deadline to complete 500,000 loan modifications, he answered, "I'm confident the industry will meet that goal."
Citi's main concern, according to CitiMortgage CEO Sanjiv Das, is the scale of its loss mitigation effort.
Finding efficient ways to build up loan processing capacity is an industry challenge. And hiring new staff is one traditional way to go about it, he says, so Citi added 1,400 loss mitigation employees since the first quarter of this year bringing the total to over 4,000, a 35% increase. "When you look at the people that we have hired and trained in implementing loss mitigation processes, it's a significant use of resources."
Loss mitigation campaign structuring efforts also included technology updates. "People forget that operating systems have been built over years, but their re-engineering has been done over months. We're adjusting and learning through that process."
Grassroots partnerships with nonprofits around the country have been another driver for loss mitigation success, he says. "In many instances they are able to go door-to-door to contact customers directly. At the same time they provide quality housing counseling which is helping people access Citi loss mitigation services that helped them stay in their homes."
The confluence of all of the above, he adds, allowed Citi to work with 108,000 borrowers, up almost 30% compared to the first quarter, for loan volume of over $16 billion. Given the unprecedented volume of customer calls, Citi said, HAMP and other loss mitigation initiatives "were unexpectedly challenging to put in place." Demand lead to expansion of call center capabilities in recent months. Beginning in April the bank solicited over 140,000 delinquent borrowers. Starting in July, over 40,000 borrowers have been offered trial HAMP plans to date.
Foreclosure prevention initiatives include the recent implementation of HAMP and Citi Homeowner Assistance, a multifaceted program that started in 2008. It assists various specific needs for homeowners who are current on their payments but may face economic distress, borrowers who have fallen behind on their payments and recently unemployed eligible customers. In addition, specialty trained servicing units work with homeowners to find long-term solutions, evaluate portfolios to identify borrowers who may be eligible for reduced monthly payments and adoption of HAMP, and Citi's Office of Homeownership Preservation offers free counseling and counselor training in partnership with community and nonprofit partners.
The second quarter brings the number of Citi-serviced homeowners assisted since the start of the housing crisis in 2007 to 625,000 representing a total of over $67 billion in HAMP modifications.