Improving Practices, Collaborating with Originators
There is a real opportunity for change in the future if some of the big institutions decide to sell off and allocate portions of their assets to special servicers and smaller shops.
In between sessions at the 4th Annual Mortgage Servicing Conference in Dallas, Amy Brandt, the CEO of Vantium Capital Inc., the parent company of Acqura Loan Services and Strategic Recovery Group, discussed this opportunity with Managing REO and talked about the future of the overall mortgage market.
“Clearly, the traditional form of servicing is not having a big enough impact. We need to get at the heart of it a little more aggressively. Things seem to be a little more positive, but I think there is still more pain to come. All of the writedowns and losses are still yet to be realized.”
Acqura is a servicer focused primarily on subperforming and nonperforming mortgage assets and its sister company SRG is a third-party asset recovery company.
She believes servicers need to be more proactive in the way they monitor portfolios. It’s about not waiting for that default to occur. It's important for servicers to look for changes in home prices and possible negative equity. They need to look for changes in consumer behavior, get in front of the default and have meaningful dialogue with the borrower. Servicers must be more proactive in finding solutions. There will no doubt be mortgage products created to get people into homes. It’s a question of who finances that. There is no real market for any kind of securitization. There are not many players out there who are willing to put their balance sheets up that are not a bank.
Brandt believes something will emerge and she thinks it will start at jumbo A. There are a lot of great analytical risk model arguments to be made that it's still good money, she said. The market has a lot of high balance homes out there where borrowers are making payments. These borrowers make the money to support the credit.
“There should be some lending outside of government lending at some point. We’ll see how it evolves. People are trying a few things. Once the path to that is established, I think whatever market emerges the ultimate investors are much more savvy and critical from a risk perspective and will demand underwriting standards and servicing,” said Brandt.
“That message is not lost on them. You not only need to have the underwriting standards in place to originate good credit, but you have to back that up with the right servicing practices to ensure performance on these assets. That entire story will be required to get a deal done.”
In order to rebuild the housing market, the lessons of the past cannot be forgotten. Everyone is going to have to take a strong look at what each party will do in the future. It takes people who have been in the industry for many years to come up with solutions, because they are the ones closest to the problems.
There will likely be some changing of roles and responsibilities within companies to make the mortgage market work, especially at the executive leadership level. Both the origination and servicing sides are encouraged to be more collaborative, Brandt predicts.
“Going forward for the specialty lending that does re-emerge it’s not necessary that they be owned by the same institution but that they at least collaborate. 'This is the product we are going to originate. How would you service it?' Have that dialogue before the loan is originated and then maintain that relationship with back-and-forth dialogue as the product cycles through its life.”
The long-term partnership Brandt envisions is unlike anything that’s ever been done. “A lot of how it happened in the past was they put loans together in a pool, issued a security and put the servicing out to bid. There was due diligence done on the servicers at a certain standard.”
She says there will be a new perspective required on the business and how pieces of it work together.
There are so many disparate players juggling different views, challenges and interests from the Realtor to the title company to the originator, then to the servicer, she told Managing REO. Getting that to work seamlessly and create a product has always been a challenge.
There’s no question, going forward, mortgages will be more expensive, she added.