Technology and Teamwork
Ms. Coon is a shareholder in the Michigan based law firm of Trott & Trott. This viewpoint is the first part of an article she wrote about the foreclosure process. The second part will run in the May edition.
Foreclosure works to make things equitable and affordable for all borrowers by helping to control losses, despite the forbidding sound of the word to lay audiences. Foreclosure helps preserve the cost structure, yields and profitability that our lenders and financial market require in order to sustain our nation's free-market mortgage system, i.e., homeownership.
Where do we come in? The success of this foreclosure process depends on the performance and integrity of the servicing industry and their allies, law firms who specialize in foreclosure. Working together over the years, we have created a highly efficient, quality system that has proven adaptable.
Trends and Challenges
It wasn't that long ago that we were shuffling stacks of typewritten reports of data compiled manually, typing foreclosure publication notices and sale deeds, and flipping through Rolodexes. Now we work with computers and sophisticated database management programs that we use to manage the progress of foreclosure referrals.
Certainly, the sheer increases in volume that servicers and strategic partners must deal with each new year make a strong case for technology. Yes, more borrowers (increased population and residential housing stock in our nation) mean more defaults and more work for us.
Still, other factors have contributed to the growth in volumes. These include the refi boom, the greater variety of mortgage types, less conformity in borrower profiles and the ease with which many debtors can file for bankruptcy. In all, these factors reflect our dynamic mortgage lending marketplace; what most would agree is the world's most creative and fluid.
As a result, we have an intensive work flow, but one where cases can't be pigeonholed and standardized as easily as in the past. This is for two reasons. The first is our more complex society. Families with multiple households or multiple properties, divorce, separation, claims of children, homes bought for elder parents, our mobile society: these can all complicate title searches and communication with those about to be foreclosed upon or those already in process. The second factor is the complexity of the lending industry itself. Hundreds - maybe thousands - of mortgage lenders, servicers and investors now operate, each with distinct process requirements and reporting criteria that its foreclosure law firm partner must follow. Servicers' increased reliance on outsourcing has also resulted in additional demands to the law firm. The demands on our time and the possibilities for making an error multiply similarly. Add to this, of course, perhaps our No. 1 mandate-always shorten, shorten, shorten that time period from referral to the first legal action and referral to sale.
Cost Control, New Efficiencies
All is not doom and gloom. We have responded with systems, technologies, personnel and organizational behavior that cuts costs, reduces staff requirements as much as possible, and improves accuracy. At the same time, we must have some flexibility and adhere to ethical standards. As an example of the former, we may be able to identify candidates (in or out of bankruptcy) that would be appropriate for different loss mitigation options. As handled by a firm's loss mitigation department, this strategy often retains home ownership for the borrower while reducing servicing and foreclosure costs and improving the lender's portfolio yield.
Clearing the Way
A key factor of success is identifying bottlenecks in the foreclosure process. One such issue has been the ability to secure clear title on a property. The culprit, in most cases, is sloppy work on the origination side. One solution implemented by my firm was the creation of a title subdepartment within our foreclosure division. As soon as the problem is identified, our title attorneys and trained specialists start working in all directions to rectify the problems. This has helped to reduce the time frames on these problematic files substantially. Other firms have implemented similar programs.
Data entry is time consuming and error prone. An approach that has helped firms when dealing with data is an "enter once, make sure it is correct through quality control procedures, then leave it alone" policy. Locking down and securing data in that way, such as with the legal description of property and other data used repeatedly through the process, has reduced errors and saved time. Similarly, all client-specific rules (lender, servicers, outsourcers or investors) typically outlined in attorney agreements, for example, if appraisals should be ordered, reporting format, requested data entry of client systems, preferred communication methods, billing terms and the like, are all built right into our customer state-of-the art case management system. There is no need to keep looking up the required procedures and much less chance of missing a deadline.
It would be the subject of a separate article, but I want to highlight the importance of working, wherever possible, for a standardized nomenclature and system in foreclosure reporting, auditing and invoicing. USFN, of which our firm is an active participant, has worked closely with the MBA and the real estate finance and servicing industry as a whole to achieve greater efficiencies and cost savings in the processing of foreclosures and bankruptcies, in training, and in monitoring state and federal legislative and regulatory action and trends. This type of coordination will help improve profitability for all of us.
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