Excerpt from: Mortgage Perspectives
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| April 23, 2009 | | Loan modification programs keep changing. Unless servicers have a way to implement them, they will not succeed in their goals. | A favorite New Yorker cartoon shows a younger scientist showing his older mentor his fantastic calculations for a new theory on a blackboard. There are complicated formulas on the left and more on the right. In the middle is written "then a miracle occurs." The grizzled sage suggests, "I think you should be more explicit here on Step 2."
In the last 6 months, there have been more new loan modification programs introduced than in recent or distant memory. We've seen FDIC Loan Modifications in November. The Fannie and Freddie Streamlined Mod Programs in December. Then these were superseded by the HAM programs announced by each, in March. But can servicers keep up?
As Howard Glaser wrote in a Viewpoint column for The American Banker on April 15, "It is important to remember that a loan servicer's traditional duty is to collect payments from homeowners and pass those payments on to investors…. With little experience and know-how on conducting loan workouts on a mass scale…. Without the right tools and retraining, servicers are doomed to toil away unproductively. There is a real possibility that the mortgage industry, and the administration, will be overwhelmed by the sheer load."
Many law firms, foreclosure management firms, and borrower outreach firms that currently work on behalf of servicers do some sub-servicing already. One emerging trend is that these firms are being asked to become full-fledged sub-servicers to help the big servicers manage the overflow. These companies, who are not burdened by existing legacy infrastructures are coming to Overture Technologies for solutions that perform the loan modification data collect, eligibility analysis and borrower customization. Neither skilled at nor obliged to "collect payments from homeowners and pass those payments on to investors," these firms are gearing up to quickly, efficiently and effectively help the borrower to a sustainable loan modification.
We think we're making progress on "step 2."
"A smooth sea never made a skilled mariner."
-British proverb | | |
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