Prevention and Rescue Efforts Redefined
Loan modifications in a crisis have redefined the loss mitigation landscape turning an already intensive operation into a far more intense process.
The goal is to keep loans current minimizing losses through principal reduction, moratoriums, incentive-based programs, or technology, to mention a few. And that demands large-scale, well-designed rescue and preventive efforts. If physically it involves maintenance that prevent gradual property decay, a multitude of related financial risks keep servicers looking for new ways to mitigate losses. An updated list of potential loss risk items that affect a servicer's bottom line is quite different from what it used to look like only a few years ago. Credit, loan default, insurance and litigation risk are classics. Modification redefaults and strategic default risk are still new. So are some preventive legal tools. New legislation allows for fees on those who try to walk away from their property. Ultimately due to its scale, the servicing marketplace is a captive of modifications.
Since 2007 modifications helped sustain over 3.2 million mortgages. Servicers delivered over 9.5 million workouts including repayment plans and forbearance. More "shadow inventory" loans are in the pipeline, sitting in the courts, or at risk of strategic default.