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Special Servicer Sees Success

A Texas-based servicer of distressed mortgages that launched only late last year expects to hire more than 100 employees during the next 12 months. The high-touch servicer is seeing big success with its modifications — which are re-defaulting are a far lower rate than the rest of the industry.

At last week’s Mortgage Bankers Association’s annual conference in San Diego, Wingspan Portfolio Advisors’ chief executive officer and president, Steven Horne, sat down with to talk about servicing distressed mortgages.

Wingspan currently services around 7,000 defaulted first and second mortgages.

Since launching last year, the staff has grown to 34. But within a year, Horne predicts headcount will reach 150. Such rapid growth is possible because the company has all of its technology and management team in place.

Typical clients of the company are investment funds that purchase portfolios of non-performing loans. Clients pay contingency fees ranging from 10 percent to 40 percent of the payments collected by Wingspan.

But Wingspan also has some servicer clients for which it supplements their efforts.

Wingspan photo of Steven Horne

“I like the advent of what I see special servicing as opposed to the traditional model where you had the big servicer that did performing servicing and the default servicing,” Horne said. “The special servicer model … true default specialists, makes a tremendous amount of sense.”

He explained that if big servicers who also handle defaulted loans turn default servicing into a profit center, then they have an incentive to let more loans go delinquent.

Wingspan is completing around 80 percent of the modifications it offers. While the rest of the industry is seeing re-defaults on more than 70 percent of loans modified after a year, according to data from the Office of the Comptroller of the Currency, just one-in-five of loans modified by Wingspan has defaulted after the modification. The high success rate was attributed to greater attention, more contact and better relationship development with borrowers.

Horne, who founded the Carrollton, Texas-based company last year, noted that he anticipates a flood of distressed loans will hit the market. He explained that it is overly optimistic to believe that banks can “paper over it all and grow their way out.”

“We’re definitely seeing more trading at the lower end of the spectrum,” Horne stated. “There are a lot of people who are really waiting for the day when … suddenly they start trading like they did back in the RTC days.”

Much of Wingspan’s business is servicing defaulted loans for investors who bought discounted portfolios. Such acquisitions tend to benefit borrowers because instead of dealing with servicers who are operating on razor thin margins — they are dealing with investors who are looking to maximize value on the underlying loans that were purchased at a discount.

Horne noted that default cycles last up to eight years. By around the fifth year, more players enter the market and overpay for business. He expects that when the current cycle ends, some investors are likely to exit the market, while others will explore origination opportunities.

The CEO said he was excited about a recent investment made by Wingspan in National Claims Filings LLC. The venture promises to automate the handling of proof of claim filings, claims audits and compliant filings with bankruptcy courts across the country.

Wingspan itself uses the new service.

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