Value Retention: A Balancing Act
Especially during a crisis nothing deteriorates the value of a loan portfolio more than foreclosures, or negative equity that may lead to home abandonment. Value retention is a balancing act.
Maximizing portfolio recovery, especially in a market where servicers are not simply collecting servicing fees on performing loans but dealing with a huge volume of nonperforming loans that are starting to default, need to be modified or are foreclosed, is a constant challenge. Fraud risk only makes it worse.
Beyond calling centers and technology, the industry depends on data analytics that allow for better value assessments in today's economies of scale.
Collection law firms constitute the smallest but fastest growing market in the accounts receivable management industry as they can compete directly for contracts with creditors, or work on contract for debt buyers as they collect debts through legal channels. The pursuit of delinquent debt through legal channels has led to high recovery rates. In some cases, such as Countrywide, a settlement can translate into losses from sins of the past.
The stars of the largest effort in U.S. history to minimize loan losses are government and private sector modifications that have proven to be successful in preserving portfolio values and homeownership during this unprecedented crisis.