Email this pageMortgage Blogs
Current Editorial
November 16, 2009
By Mark Fogarty
The Transformation
The complete and utter transformation of the servicing industry becomes apparent from remarks given by Wells Fargo’s executive vice president of servicing at SourceMedia’s Loan Modifications Conference.
To start with, Mary Coffin told the Dallas conference, servicers "didn't know the word" modification just a few years ago. Workouts were the usual mechanism used for delinquent borrowers.
Servicers like her giant shop now have to engage in "default underwriting," considering the mortgage in a whole spectrum of debt where the mortgage might just be a symptom of a wider problem.
2009 has been "a rough year for servicers," she told the conference, and admitted candidly "we haven't met the service level our customers deserve."
And the government's mod program, while helpful, caught many servicers flatfooted. They learned the details of it the same time customers did, during President Obama's rollout of the plan on Feb. 18. "Our phones rang while he was speaking," she said.
An additional wrinkle is that there is not just one HAMP program, but different details for "Freddie HAMP, Fannie HAMP and FHA HAMP," she said.
Historically, just 5% of calls to Wells' servicing department came from borrowers who were current on their mortgages. In the months after the HAMP announcement, that rose to 40%. And staff just simply could not handle the volume.
"We're hiring people by the thousands and thousands," she said, and turning them loose on borrowers after just four or five weeks of training.
An important consideration for Wells is to modify first and second mortgages together, as well as short-term modifications for those who may regain employment. Wells did no payment-option ARMs, but acquired many in the Wachovia deal, and is "aggressively" trying to get its arms around that tricky portfolio. "Principal forgiveness here had success," she said.
Wells has studied its loans that were 60 days or more delinquent during the second half of 2007. Of that cohort, 50% are still active loans, 20% have paid off and 30% are in foreclosure.
Of the 50% still active, "75% are in some sort of delinquent status," she said.
Wells is finding success in achieving a 6%-10% decrease in payments. Usually, though, it is not from principal forgiveness. "It takes a lot of principal forgiveness to achieve a $200 reduction. You can achieve that in a small interest rate reduction."
It is also finding success in moving origination underwriters over to the servicing side. "That's been a sweet spot for us."
But overall, servicers are suffering from a black eye. "Our work is cut out. Our transformation is not done," she concluded.
Click here to access our archives
