NovaStar Stems Losses with Job Training
NovaStar Mortgage has taken a unique approach to loss mitigation that is designed to help keep more troubled borrowers in their homes.
The Kansas City-based subprime lender recently completed a pilot of LaunchPoint, a job placement and employment counseling program for borrowers who fall behind on mortgage payments.
Chris Miller, senior vice president of servicing, said the company's LaunchPoint placement and counseling services is proving to be a "highly effective" loss mitigation strategy.
"Through the end of July, we've placed more than 200 unemployed borrowers in jobs and successfully avoided foreclosure," he said in a news release.
Mr. Miller estimates that those 200 loan savers helped avoid more than $2.5 million in losses on mortgage loans totaling $17 million in principal. The total cost of the program is $400,000, he said.
On average, a foreclosure costs a lender up to $60,000 in lost interest, property management fees, legal bills and resale commissions. A weak real estate market in the area where properties are located and a lengthy sales process can exacerbate those losses.
Mr. Miller said the servicing industry as a whole has been slow to implement foreclosure avoidance strategies, but keeping customers in their homes makes good business sense.
Lance Anderson, president of NovaStar, said the company is not aware of any other mortgage lender taking this approach to help borrowers protect their investments in the case of a "trigger event" such as a layoff.
NovaStar has four career counselors on staff providing the LaunchPoint service. Recently, NovaStar expanded the program to all of its mortgage servicing customers, even people who are not currently delinquent.
Mike Enos, senior vice president of marketing at NovaStar, said the idea for the program was sparked when Mr. Miller went from one of the company's recruitment meetings to a loss mitigation meeting, and realized that many consumers facing a foreclosure risk could benefit from the job training skills of a professional recruiter.
The LaunchPoint counselors help customers with job interviewing skills, resume preparation and analyze their skill sets.
Mr. Enos said NovaStar is now promoting the LaunchPoint service through its website and statement stuffers. Collection counselors also can refer borrowers to the program, and that has boosted morale among collection employees, he said.
"There are so many advantages to the program. It has really given our collection people a sense of empowerment and being able to help somebody," Mr. Enos said.
The program also dovetails nicely with traditional credit counseling services. NovaStar continues to refer customers to consumer debt counseling agencies when appropriate for consumers that have trouble managing debt obligations.
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