Recently I got the chance to chair SourceMedia's fourth annual servicing conference (six if you count a couple we did in the 1990s) in Dallas and it was our biggest show ever. Here are the remarks I prepared to start the show.
I don't have to tell all of you folks here what terrible and exciting times we are in in the mortgage business. We're in an epoch that I've never seen before despite my more than 25 years covering mortgages. Terrible because I've seen estimates recently that despite all the foreclosures processed, REO sold, government and industry forbearances, short sales and deeds in lieu done, loan workouts, loss mit, and loan modifications we've seen since we met here in Dallas last year, that as many as more than five million borrowers are still at risk of foreclosure.
That's a staggering number. Besides being horrible news for the borrower, the pileup of overdues and foreclosures has left neighborhoods at risk of decay, lenders at risk of big losses even after REO sales, and originators and Realtors trying to cope with the problem of evaporating home values and borrowers under water on equity. No matter what the government and the industry does, it will be years before it all gets right-side-up again.
That's the terrible part. Now, what's the exciting part? Obviously, servicers are being challenged to operate at the peak of their efficiency and their ingenuity. Tough times bring out the best in tough people, and these are the toughest times the mortgage industry has seen since the Great Depression.
The mortgage business is notoriously cyclical, with the originations side and the servicing side moving up and down as conditions vary. But here's something new I have never seen before, and that's the flood of laid off originators who are finding work by the thousands at the big servicers, because their knowledge of the loan on the originations side makes them much more hirable than, say, the guy who used to sell Toyotas. So there's one upside right there.
Another is the amount of ingenuity and expertise being shown on the vendor side, as lenders clamor for solutions to loan modifications, which were practically unknown a couple of years ago, default servicing, short sales, and fraud prevention.
Because it's not just originators that are getting into servicing. It's fraudsters as well. I've heard stories of opportunists who take the bank's lock off an REO property, rent it out to an unsuspecting renter, and then vanish with a couple of months of rental payments in their pockets. I've even heard stories about reconveyance fraud, which is just about as far out on the mortgage food chain as you can get. Protecting yourself against fraud is a definite priority these days.
We've been following the government interventions in the servicing market as closely as you have, and does it seem to you too as if they are throwing everything they have at the wall, and hoping it will stick? Millions of HAMP modifications and HARP refis, and now second lien mods and streamlined FHA refis, and forbearances and principal forgiveness? You have to feel sorry for them, because they are really trying, even as they seemed rather overwhelmed by it all.
Well, maybe we can help. We've got hundreds of servicing experts here, whether it be on the stage as speakers, in the exhibit hall as vendors, or in the seats as practitioners. Maybe, over the next couple of days, we can help figure out what to do about all this, or at least how to make a good start at it. Maybe we can shape some best practices and things-to-avoid by putting our collective heads together and sharing what works as well as the perils and the pitfalls of today's servicing landscape.
