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The World of Default Servicing

Foreclosure mitigation activity

November 4, 2008


Two firms have released new solutions to help mortgage servicers better manage delinquent accounts and real-estate owned. Two college professors are calling for trustees to replace master servicers in deciding whether to modify loans, while Fannie Mae was criticized for doing too little to help prevent foreclosures.

CACS Enterprise was released by CGI Group Inc., a press release last month said. The latest version of its end-to end collections and recovery application includes enhanced support for mortgage and home-equity collections. It also includes loss-mitigation and foreclosure evaluation and processing.

"The new release of CACS provides dynamic scripting to guide collectors through the customer interview process, resulting in more consistent customer treatment, as well as tools to simplify the conversion of existing charge-off accounts," CGI stated.

VisiREO has been launched as an end-to-end web-based solution to manage pre-foreclosed and lender owned properties, Visionet announced last week. Unlike competing systems that charge per transaction, customers can install the system in their own environment and be in a better position to negotiate lower contractor fees.

The New York Times published an opposite editorial by John D. Geanakoplos, who is an economics professor at Yale and a partner at a hedge fund that trades mortgage-backed securities, and Susan P. Koniak, a former law professor at Boston University. The two are calling for the process of modifying loans to be moved from master servicers to community-based, government-appointed trustees.

The trustees, who would be paid by the government and hired from the ranks of community bankers, would consider workouts based on whether a reworking would bring in more money than a foreclosure and whether the borrower can afford the modified terms. The securities that are backed by the subject loans would be irrelevant in determining whether to approve a workout.

The Neighborhood Assistance Corporation of America issued a statement indicating that Fannie Mae has become a roadblock in the campaign to reduce foreclosures. A protest was planned for Oct. 29 by the group at Fannie's Washington, D.C., headquarters.

NACA said Fannie won't let servicers restructure a loan before it is four months past due. Any interest-rate reductions are limited to current market rates, and no principal reduction is allowed.

The group also criticized the government sponsored enterprise for allowing interest-only solutions and requiring full documentation before delaying a foreclosure sale.

In testimony before the Senate Committee on Banking, Housing, and Urban Affairs, James B. Lockhart III -- director of Fannie's regulator, the Federal Housing Finance Agency -- said the company and cousin Freddie Mac have completed 130,971 loss mitigation actions through August. The activity included 36,847 loan modifications, which have increased 60 percent this year from last year. More than nine-in-ten loss-mitigation actions prevented a foreclosure.

Exeter Commercial LLC announced last week the launch of a mortgage modification group for FHA borrowers. Attorneys are utilized to prepare a modification request package for presentation to the servicer.

U.S. Department of Housing and Urban Development Secretary Steve Preston issued a recent statement indicating that the agency has helped prevent 400,000 with its FHA refinances since September 2007. The number is expected to reach 500,000 by the end of this year.

Sam Garcia worked in mortgage lending for twenty years prior to becoming publisher of MortgageDaily.com.

e-mail: [email protected]

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