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Retreat Capital Deploys Predictive Modeling Technology

Retreat Capital Management Group, a provider of loss mitigation and portfolio management products, has deployed AnswerMine's analytic software to power its predictive modeling services.

Lender and servicer clients can determine risk levels for mortgage loans and take decisive action to prevent delinquencies, defaults and foreclosures, rather than reactively responding to troubled loans after the loan is already at risk.

It's important to understand the behavior of homeowners, especially because of the recent change in credit card laws, said Arvin Wijay, CEO and founder of Retreat Capital Management.

"The first thing they want to protect is the credit card but not the mortgage. They'd rather keep the credit card, pay off everything else and go late on the home. Because of this, we are providing this technology for our servicers. Don't just do forecasts and predictive modeling based on roll rates," Wijay told Managing REO.

"You have to really look into your portfolio and see which one is going to cure by itself. You know in 60 days or six months out, based on their credit behavior and purchasing history, what they are really doing. Then you can know if these people are going to stay in their home. Are they on a spending spree or are they really conserving?"

The market is currently clogged with so many foreclosures and delinquencies that servicers can't keep up with the volume and according to many experts, there is no sign of a slowdown.

"There's no question that a certain percentage of foreclosures could be prevented if the lender or servicer would proactively present the borrower an appropriate solution," adds Wijay.

"There are a variety of foreclosure alternative options, but lenders need to determine which solution is a best fit for each borrower, and do so fast enough to prevent the mortgage from becoming delinquent or getting closer to foreclosure."

Retreat Capital Management's predictive modeling services were created for lenders and servicers that want to implement targeted mortgage restructuring, retention and originations.

"One of the big problems in loss mitigation is that lenders and servicers have been relegated to a reactive, wait-and-see stance when it comes to delinquencies and foreclosures," says Wijay.

"Accessing the risk level of mortgages gives lenders the power to determine the appropriate solution. This type of proactivity would make a huge impact on not only the number of defaults and foreclosures, but also the speed in which cases get handled."

When a loan modification is denied, don't give it back to the servicer because they have to wait until they find another vendor to do the short sale, he adds. And while servicers are updating financials, in this market, unemployment is a wild factor.

"If the customer is only told they are 'denied' and not given other solutions, it often takes another 11 or 12 months to get a hold of the borrower. By that time he's in foreclosure," he said.

"We want to provide that warm handoff and say, 'Do you need a Realtor that provides short sales,' so we are engaging that borrower to keep that momentum going."

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