In theory, it sounds like a simple idea: assign delinquent borrowers to a single person in the servicing department responsible for guiding them through the loss mitigation process.
This single contact will ensure that troubled mortgagors have someone to call who knows the status of their loan modification application or whether the investor has agreed to a short sale. And it will supposedly end the frustration borrowers face when they can’t get through to anyone or the servicing department can’t find their file.
But industry consultants at Newbold Advisors say it will not be easy for servicing shops to create this single point of contact, which is required under recent consent orders 14 major servicers signed with federal banking regulators.
In fact, servicing consultants believe the single point of contact may be the hardest provision in the consent order to implement—and one of the most expensive.
Among other things, the consent order requires servicers to submit an “action plan” within 60 days that provides for effective coordination of communications, both oral and written.
Once the plan is approved, the servicer will have 120 days to create this “easily accessible and reliable single point of contract for each borrower,” the consent order says.
Newbold partner Tim Gaven said servicers will need “very very smart” workers to serve as single points of contact. “They have to know everything from loss mitigation all the way through the foreclosure process,” he said.
In addition, servicing shops don’t have the information or telephone systems to have a “seamless single point of contact,” Gaven said.
Call centers currently handle borrower requests for information. (Usually a call center contact then finds someone in the servicing shop who has the answer.)
Generally, loss mitigation, bankruptcies and foreclosures are processed separately and informational records are maintained in different platforms.
A banker for instance can pull a file on a customer to obtain all their account information. “But they don’t have that in the mortgage servicing world,” said Newbold managing director David Dill, “which created some the problems we have today.”
Now, regulators want a single person to respond quickly and provide correct answers with regard to the status of the borrower, where the process is headed, and what they need to do. Servicers fear that implementing such a plan will take a tremendous investment in technology just to get their information systems up to speed. “So all this information has to go to one portal,” Gaven said, so the borrower can be given the correct information regarding their loan modification, short sale or foreclosure.
It will also require new skill sets and training.
Newbold Advisors, which is based in Tampa, Fla., currently has a staff of at least 250 consultants. Its phones have been ringing off the hook ever since the consent orders were signed back in early April.
Gaven expects the firm will add 50 to 100 more consultants within the next four or five months. To keep up with the demand for “our services, we really have to respond,” he said. In short, the consent orders will force major servicers to expand capacity across their entire organizations in terms of staffing, processing and technologies.
Moreover, it’s anticipated that the consent orders will also have an impact on smaller servicers. “Even though they don’t have to comply with the consent orders, the small shops are going to have to comply within an industry perspective to be competitive,” Dill said.
The former president and chief executive of Saxon Mortgage Services noted that the expense and effort needed to revamp their foreclosure and loan modification processes (as outlined in the consent agreements) is going to push smaller servicers to consolidate. And they aren’t going to be “happy mergers,” Dill added.
He noted this could result in small shops merging with some of the megaservicers. Or it could spur small and midsize servicers to create a new megaservicer.
