Now that the office parties have all concluded and the wrapping paper has hit the recycling bin, we must all turn our attention to this brave New Year.
In our personal and professional lives, we will seek out that old comfortable standby, the New Year’s resolution. It would be comforting to think that recovery of the mortgage industry is simply a matter of a few timely resolutions.
The problem with new year’s resolutions are that the very term has become so watered down over time that when we hear it spoken aloud, pessimism tends to creep in and we often think, "good luck with that, let me know how it all works out."
In our business, we cannot rely on good intentions anymore. A resolution is okay, but we really need to consider our strategies and how we describe them in stronger terms than a flimsy date dependent resolution. After all, a problem well stated is a problem half solved.
What if we took our organizations out of this annualized rhetoric, what if we instead chose to be resolute? Ah, now we are getting somewhere!
The varied and complex issues facing us require leadership and enterprise-wide change. Determined and effective leaders should adopt the most robust language they can find when communicating with clients, employees, and investors. Recovery will take more than weak language and half measures; we need resolute optimists now more than ever.
While modifications and short sale flips are on the radar and rightfully so, the savvy insider frauds occurring in the REO liquidation market bring Servicing and Loss Mitigation into the discussion as well.
The “distressed” market is a growth industry and because volume is significantly higher in the REO market, it is being targeted by sophisticated groups. The burgeoning inventory makes for motivated sellers and the fraudsters revel in these opportunities. What can be done?
A resolute servicer should be looking at the hardest hit geographical areas.
The foreclosures and REO inventories in these areas should prompt additional levels of scrutiny. Scanning the property histories to isolate pendulum swings in value or recurring buyer and seller combinations takes enormous human capital.
1) Use technology instead to sift through the immense data pool to augment your loss mitigation strategies.
2) Set systemic triggers that automatically refer REO sales to loss prevention specialists in cases where risks are prevalent.
3) Analyze transactional history and MLS data, which are crucial to the proactive identification of risk laden deals.
The bad actors are still out there and they are looking forward to a big New Year as well. Do we know who and what we are really dealing with at the point of liquidation? A resolute loss mitigation strategist knows the value of portfolios over time and is aware of the participant’s credentials, whether they are a realtor, or loan officer, buyer, or appraiser.
The entire mortgage lifecycle depends upon sound lending decisions, comprehensive quality control processes, responsive fraud detection, and an unyielding loss mitigation strategy. We must be attuned to the adaptive landscape of evolving fraud schemes and realize our vulnerabilities do not end with the origination process.
We need to look across the entire spectrum of the mortgage cycle specifically including servicing loss mitigation. Closing half of the portholes will never save a sinking ship. Since most analysts agree that the lack of effective fraud prevention processes was a critical factor in causing the economic crisis, it follows that intelligent fraud prevention must be an integral piece of the recovery.
In much the same manner as our semantic exercise above, we are presented a myriad of solution competencies available in the marketplace.
A "resolute optimist”, would choose a solution which matches their unwavering perseverance; a solution that provides a dynamic combination sufficient to the task. There is too much at stake in today’s lending environment for good intentions and words alone.
Matt Merlone is the CFE director of asset services, Interthinx
