Mitigation Efforts Across the Industry

As servicers continue to feel the pinch of the market, overloaded with defaults, Integrated Mortgage Solutions in Houston has launched Asset Disposition and Management Services to help servicers handle loss mitigation tasks on an outsource basis.

IMS will continue its loss mitigation services including skip tracing, door-knocker, inspections and preservation, as well as its borrower outreach call center and short sale service. The IMS call center is also geared to assist lenders and servicers with the new Streamlined Loan Modification Program launched by the Treasury Department, Federal Housing Finance Agency, Department of Housing and Urban Development, and Hope Now.

"Servicers are having a hard time keeping up with volume to prevent foreclosures," said Cheryl Lang, president of IMS. "People can't get through to the servicer. If they do they get different people every time. There's no consistency. We want to help servicers get over that hump. "We'll have staff certified to talk to borrowers. We can send out loan-mod packages. We have a network of Realtors to help borrowers reach out to them to do short sales. They can pick and choose which services they want or they can use all of them."

According to the Mortgage Bankers Association, a record one in ten home loans were delinquent or in foreclosure at the end of September 2008, and a total of 2.2 million homes are expected to have entered the foreclosure process by the end of 2008. The MBA emphasized that with the economy continuing to deteriorate, the foreclosure outlook for next year is worse than 2008.

ADAM provides the lender with experienced asset managers in conjunction with IMS' Web-based technology platform to customize a loss mitigation outreach and short-sale approach based on the lender's business model and manages the end-to-end processes. Its short-sale model is designed to expedite the closing process.

Of course this new undertaking has prompted IMS to take on new staff and be prepared to expand further in the future. "We have a second Houston site," pointed out Ms. Lang. "We meet fair debt collection requirements. We have a team there prepared to talk with borrowers. It's non-threatening. We're a third party trying to help the borrower. We also have room to expand further.

"We'll offer an avenue where clients can outsource to us in a seamless manner vs. just throwing bodies at this. The client can either give us the data directly or give us access to their system."

In terms of overall market recovery, Ms. Lang doesn't see light at the end of the tunnel just yet. "We've finally admitted that we're in a recession. I talk to borrowers everyday that have lost their job or have taken a cut in pay. I don't see this going away."

Because of the unprecedented number of regulatory changes, mortgage servicers are seeking industry experts to help them meet growing loan-mod volume while ensuring compliance with rules and regulations.

Other companies are also getting involved. In Pleasanton, Calif., Ellie Mae, a provider of loan processing software here, is creating and updating loan modification closing packages for several top 10 lenders.

Ellie Mae said clients are currently using the service to process more than 5,000 loan modifications per week. The service creates loan modification packages with Web-based data entry that require no rekeying of data. All documents are compliant with Fannie Mae, Freddie Mac and MERS requirements, Ellie Mae said.

The service assesses the needs of the lender's workflow, accommodates lender-specific workout plans, and handles all recording, notary and compliance monitoring needs, the company said. It can accommodate either "wet" signatures or electronic signatures on loan-mod documents.

Ellie Mae said the modification service is a collaborative effort between the company's loss mitigation partners and Online Documents, a firm recently acquired by Ellie Mae from Stewart Lender Services, with whom Ellie Mae has a partnership. The acquisition of Online Documents opened the door to serving larger clients.

"They had made some good progress in the loan modification area," said Jonathan Corr, chief strategy officer at Ellie Mae.

It builds upon Ellie Mae's acquisition of Contour back in 2001 and the subsequent evolution of Ellie Mae's Encompass origination solution, keeping document preparation within a single system rather than viewing doc prep as a complement to the loan origination system, Mr. Corr said.

"We basically came up with a model that was more of a Web services model where everything stays inside Encompass."

Working with larger mortgage servicers creates some complexity that needs to be addressed, Mr. Corr said, requiring flexibility and the ability to react to different levels of service demand. Online Documents has added to Ellie Mae's capacity to deal with the complexity of large servicing shops, he said.

"The way data comes out of their systems is all over the place," he said.

Most servicers don't have the capacity to manage the rapidly growing volume of loan modifications, Mr. Corr added.

He views the loan modification outsourcing opportunity as a "short window," which will probably wind down after two to four years. But Ellie Mae's loan modification program could evolve into some other form of long-term B2B commerce activity, he said. The whole process will give lenders more experience in how electronic commerce can benefit transparency and quality, he said.

Another company in Jacksonville, Fla., is capitalizing on technology designed to support cross-sell initiatives to assess loans at risk of default and design appropriate workout solutions.

Lender Processing Services, which owns the widely used Mortgage Servicing Package for automation of loan administration, has unveiled a new service to facilitate mass loan modification programs.

LPS says RediMod automates loan eligibility and optimization determinations for loan modifications. LPS offers the program as a "cafeteria style" slate of options, so that mortgage servicers can use all or part of the service. That way servicers with partial workout systems in place can choose to add capabilities from the modular technology.