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Cutting Losses on Loan Defaults

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New government policies for loss mitigation were announced, while Freddie Mac disclosed plans to rely more on special servicers for high-risk loans. But when foreclosures can’t be avoided, a number of companies claim to help servicers minimize their losses on real estate owned.

The foreclosure prevention policy used on residential mortgage assets held by Maiden Lane LLC — which was formed by the Federal Reserve Bank to facilitate the acquisition of The Bear Stearns Companies Inc. by JPMorgan Chase & Co. — was used as a model for a policy on other residential mortgage assets held, owned or controlled by a Federal Reserve bank, a January fed announcement said.

The policy was also used for assets of Maiden Lane II LLC and Maiden Lane III LLC, both of which were established in the rescue of American International Group Inc. The policy was developed pursuant to section 110 of the Emergency Economic Stabilization Act.

The U.S. Department of Housing and Urban Development noted in a January bulletin that time frames for foreclosures can be extended 30 days when the borrower does not qualify for loss mitigation and the loan terminates in foreclosure. The extensions are tied loans under the Project Lifeline Initiative.

In order to qualify for the extensions, HUD said the mortgagee must have established a program targeting seriously delinquent borrowers, mailed letters to 90-day delinquent borrowers and received a borrower response with adequate information to determine a plan of action.

Freddie said earlier this month that under a new strategy, it will employ third-party servicers that specialize in Alt A loans and other high-risk mortgages. Under the plan, high-risk loans that are at least 60 days past due will be given to a specialty servicer for intensive attention. All of the government sponsored enterprise’s workout options — including the streamlined modifications — will be available to the special servicer.

Ocwen Financial Corp. was named as one of the special servicers by Freddie — which has targeted around 5,000 reduced documentation loans in California, Nevada and other high-delinquency states.

“Although Alt-A loans were made to borrowers with strong profiles and represent a fraction of Freddie Mac’s single family portfolio, they account for half of its seriously delinquent mortgages,” the statement said.

Regions Financial Corp. recently said it reached out to more than 100,000 residential and home-equity borrowers during the first year of its loss mitigation program. The activities included contacting adjustable-rate mortgage borrowers six months before rate adjustments, distributing flyers and mailings, and implementing HUD’s Hope for Homeowners Program.

An announcement today from Titanium Solutions Inc. indicated it helps servicers make contact with delinquent borrowers. Its HomeTouch service utilizes varying levels of service depending on the degree of delinquency. A 350-seat call center has been opened in Fort Mill, S.C., to accommodate increased capacity.

Titanium made its announcement from Tampa, Fla., where the Mortgage Bankers Association is holding its National Mortgage Servicing Conference & Expo this week.

Integrated Mortgage Solutions announced from the conference that two new customers have singed on to use its asset disposition and management services. Among tasks performed by the company are skip tracing, field visits and property preservation. The company also operates a borrower outreach call center and assists servicers with short sale and REO management.

“By providing borrowers with a single, third-party point of contact throughout the loss mitigation process, IMS substantially increases the success rate of loss mitigation initiatives for the lender,” the statement said.

Also issuing a press release from MBA’s conference was ProVest LLC, which said it is working with 16 of the top 20 mortgage servicers and one of the GSEs. ProVest is a national process server that locates and counsels delinquent borrowers.

ProVest claims that it locates more than 55 percent of the 100,000 borrowers its searches for each month.

An automated decisioning system for servicing distressed mortgage assets was launched by Overture Technologies, a January announcement said. The Mozart system aids servicers in managing unprecedented delinquency, mitigating foreclosure losses and addressing the complexities of modifications.

Overture planned to debut its new offering at the MBA conference.

MBA said last month that its education division, CampusMBA, has partnered with Radian Guaranty to provide the mortgage insurer’s customers training on loss mitigation techniques and services. A boot camp-style workshop is immediately available for servicing managers, counselors and other personnel who handle or monitor loss mitigation workouts.

“The workshop provides critical insights on loss mitigation issues including common reasons for default, investor and insurer loss mitigation requirements and workout options,” MBA stated. “The five hands-on exercises, which include the design of a loss mitigation workout plan, ensure that professionals can immediately apply these loss mitigation skills to their job function.”

In a December news release, Asset Foreclosure Services Inc. touted its foreclosure processing services available in nine states including California. The Woodland Hills, Calif.-based firm said it processes foreclosures from notification through asset disposition.

Special servicer Marix Servicing LLC turned to Logicalis Inc. to help develop loss mitigation software, a recent press release said. Marix was able to accelerate the collection of critical data.

Late last year, Fiserv Inc. announced it enhanced the capabilities of its home retention solutions. The improved offering supports the GSE’s streamlined modification program. Fiserv said the solution meets a broad range of needs, including borrower engagement, analytics and loss mitigation.

Granite Loan Management reported this month that it has seen record demand for its REO risk mitigation services. The company emphasized its construction lending focus and noted that its Web-based ordering platform will confirm recorded liens, mortgages, and building permits.

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