Our alliance members recognize the importance of improving the customer experience in mortgage servicing and they have been working hard to achieve that goal. An ongoing demonstration of the effort on reaching customers directly is the large number of outreach events that Hope Now has helped organize around the country since the crisis hit. Loan servicers and nonprofit counselors have worked with Hope Now staff to set up events in different cities and around the country, spending two, sometimes three days on the ground in distressed markets providing in person help to at-risk homeowners. Hope Now initiated the events in 2008 and when the Making Home Affordable program began, we partnered with Treasury to combine industry and government efforts in joint events to reach more borrowers at risk and offer solutions in a timely manner.
Part of the focus at these events is to make sure that the customer walks away feeling that they have been helped or at the very least put on the right path to get help. Providing access to HUD-approved housing counselors at the events has been a very important component of the free services offered to a borrower. If a borrower comes prepared with all the necessary documents and information, they may have the option to be underwritten on site and approved for a loan modification or other workout by their loan servicer, subject to various validations.
Together, we have held 112 outreach events. Just a month ago, Hope Now members and Making Home Affordable partners were in two cities in Florida and met with more than 2,000 homeowners. The latest totals for all outreach events reached 89,207 borrowers. Our follow up from those events indicates that 43.5% have been assisted by resolving their delinquencies without foreclosure sales. As an addendum to this testimony, there is a list of the communities in which Hope Now, partnering with our industry members, the government-sponsored enterprises, Treasury and nonprofit counselors have been to since we started holding outreach events in early 2008. It is also important to note that several of the larger servicers are holding their own company-sponsored events all over the country which directly reach their borrowers at risk in key markets.
Without question, the outreach events have improved the experience of many customers trying to resolve their mortgage difficulties through a face-to-face meeting with their loan servicer or counseling through a nonprofit agency. Our exit surveys reflect over 88% strong borrower satisfaction after they have a chance to meet face-to-face with their loan servicers. As many as 30% to 40% of those attending had never had contact with their servicer before the meeting. These numbers will vary slightly from market to market, but in every case the majority of homeowners who come to the events are delinquent on their loans and more than satisfied with the service they receive at the outreach event. We truly believe that nothing gives a distressed homeowner more peace of mind and satisfaction than sitting down face-to-face with someone and being able to discuss the options that are available to them. I have included as part of my addendum exit surveys from recent outreach events to give you a taste of how borrowers feel after coming to an event.
Another ongoing effort that was begun in 2006 is the Homeowner's HOPE hotline, the national 1-888-995-HOPE number that servicers and investors support financially, for homeowners to call to speak to a HUD-certified counselor. The Homeowner's HOPE Hotline, operated by the Homeownership Preservation Foundation, has become the leading national hotline and has received over 5.2 million calls from borrowers seeking help with their mortgage.
It is important to understand some of the history of mortgage servicing and how the tremendous challenges of the current crisis have impacted the mortgage servicing system.
In the decades before the current crisis, mortgage servicing developed some uniformity in part because of the requirements of GSEs and the Federal Housing Agency for servicers on loans purchased by the GSEs or insured by FHA. In both cases these entities established requirements for mortgage servicing as well as requirements for other features of mortgage finance. In particular, the GSEs became the dominant force in setting standards in the industry and could dictate servicing rules and standards because they were the primary investor for the majority of the residential mortgage loans originated and serviced.
When the private-label mortgage securities market grew in size in the late 1990s those private-label securitization agreements dictated specific servicing terms that had to be followed by the servicers, and when details were missing, the practice was to default to the GSE rules as the industry standards. While the market functioned smoothly and delinquencies were generally low, these differences in servicing requirements were not meaningful.
However, once the dramatic downturn in the market occurred in the mid-2000s, the challenges facing servicers grew tremendously and differences in servicing requirements became more important. Prior to the crisis, servicing had been a fairly simple process of processing payments from current borrowers and forwarding those payments to investors. Servicers were paid a set fee for processing performing loans. Delinquent loans and troubled borrowers were a small segment generally handled by relatively small loss mitigation staffs and solutions often involved repayment plans to get borrowers back on track. The housing crisis completely changed the demands on major mortgage servicers. Servicers are now managing millions of delinquent loans and have had to hire thousands of new employees to work with borrowers to find solutions such as loan modifications which require a re-underwriting and contractual change in the terms of the original loan. This is a much more complicated servicing process that requires many more staff and additional training.
Hope Now was formed in great part to assist the industry in its attempts to deal with the new demands on servicing resulting from the housing crisis. It was also created to reach a growing number of borrowers who were going into default and were not contacting their servicer. The alliance helped industry members to work together to find a process for offering loan modifications and other assistance to borrowers that were consistent with the requirements of investors. The alliance helped build a good working relationship with the nonprofit community and government agencies to work together to stem the tide of foreclosures.
The industry strongly supports a uniform approach to servicing standards. Progress is being made in providing better service to troubled homeowners, but there are a variety of initiatives and requirements from federal regulators, the GSEs and others to set standards. These initiatives need to be evaluated and coordinated to determine the best overall standards. For example, let me address an issue regularly discussed by industry, government and nonprofit groups: dual track processing.
The dual track process is a confusing concept to many customers, and also confusing for our members to attempt to explain what it means and why it is happening to the homeowner. But the dual track process is driven in large part by investor requirements and state laws on foreclosures. For example, in many states once a servicer commences the foreclosure process by sending notice to the borrower, the steps that must be taken and the time frames in which they must be taken are directed in great part through state laws and regulations. Similarly, investors such as Fannie Mae and Freddie Mac have certain guidelines and time lines that require processing foreclosures while the efforts to modify loans continue simultaneously. There are rules that cover and protect homeowners from going to foreclosure if they are eligible for a modification and adhere to timelines for submitting documentation, validating income, and finalizing the modification or alternative solution prior to the foreclosure sale. In any event, the foreclosure process (which now exceeds 600 days in some areas of the country) continues with the exception of a 30-day process for review of eligibility for modifications. If a loan is in the midst of a modification review, the foreclosure sale process will not commence. Once referred to foreclosure, there are various pauses that will occur, and in no case should a foreclosure sale occur while under a review for a modification that falls within the HAMP or investor guidelines. Rules differ among investors as to what timelines are required. The GSEs are the most important investors setting requirements in the dual track process.
It is important to keep in mind that the investors' contracts continue to govern much of the latitude for servicers around foreclosures versus short sales and modifications. The investors and rules include HAMP, Fannie Mae, Freddie Mac, FHA, Veterans Administration and private securitization trusts. Often the most flexibility exists when a bank/servicer owns the loan in full on their balance sheet. These differences help explain the confusion in understanding the dual track issue.
Faith Schwartz is executive director of the Hope Now alliance.
