Hope Now, the mortgage industry’s alliance intended to help struggling homeowners, regularly announces how it’s helped ever larger numbers of home-owners get loan modifications. But, advocates for homeowners say the numbers of consummated loans is significantly smaller. Homeowners who’ve tried say it can be trying - and time consuming - to get a bank to agree to change the terms of a home loan. As a result, borrowers and lenders are consummating actual agreements at a far slower rate than is needed for us to work out from under the delinquent mortgage loan overhang.
This raises the question, “what’s slowing things down?” There are three major steps: borrowers and lenders engaging with each other, borrowers and lenders agreeing on a modification, and borrowers and lenders finalizing that agreement with signed, executed documents. Today’s post is about getting started.
Lenders give six main reasons why it’s hard to get the loan modification process started. The first, they cannot easily get in touch with the borrower to start the loan workout. Reasons range from the borrowers having walked out to a lender’s call center’s hours that don’t jibe well with the borrower’s working hours. Even in good times, we all know about screening calls. Lenders turn to mail to compensate with indifferent results. Some are betting on having individuals knock on doors. Sometimes the issue is not outreach – it’s knowing who the players are to talk to. Borrowers don’t always know what institution to talk to, and lenders/servicers don’t always have complete information regarding who is responsible for a loan or has a legitimate interest in a workout.
Many servicers are limited in that they can only address loans that are 60 and 90 days delinquent. Prior to that time, the borrower is simply late and the lenders/investors are not interested in a modification. But, by the time the servicer is allowed to pursue a modification, the borrower’s may have lost eligibility for otherwise attractive modifications. Sometimes the borrower has given up by then. The Amherst Securities data displayed last week makes it clear that an early start is a good start. Servicers are not uniformly empowered to make an early move.
Often the servicers, and nearly universally the borrower, labor under the complexity of the various government programs. There have been 7 programs introduced since September 2008, the most recent being the HMP program. The eligibility requirements and the underlying servicer’s calculations tend to overlap and are complex and confusing to staff and borrowers alike.
Lenders and servicers often cannot hire enough qualified people to do loan workouts and modifications. It is famously noted that “everyone who knew how to do this was already employed doing it last year.” Where do the people come from to interact with borrowers, understand the modification options and guidelines and help bring a mutually satisfactory workout to conclusion? Generic call center reps will have difficulty in this role without significant help. This leads to the last reason things are slow. Servicers can’t get technology installed that helps qualify and modify the loans in accordance with the rules and shows borrowers and loan processors/consultants alike why a borrower is or is not eligible in which situation for which workout and, if they want to get a workout they are nominally ineligible for, what they must do to qualify. HMP requires specific borrower data. The servicer needs to know when to ask for it. Some modifications will work with just a little more contribution from borrower, investor or both. Only the most experienced counselors can consistently find these borrower/lender fits.
For our part, we believe that the right technology can go a long way to enabling us all to make more mods. It collects and keeps the most up-to-date borrower information and shows borrowers and servicers the same data, via the web. It already knows all the possible workouts and gives clear concise messages regarding what must be done to take advantage of each. Let us know if you’d like to know more.
It's never too late to be what you could have been.
-George Eliot | 
