Loan Think

How to Restore Humanity to Loss Mitigation

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Leaders in mortgage servicing are changing the perception of the mortgage servicer as a faceless, automated machine that lumps them into a category based on one single data point — monthly payment due date. Much of this transformation is fueled by appropriate analysis of the data contained in each loan file. Progressive, personal loss mitigation starts with data, but effective analysis of that data is crucial and requires a proper technology structure.

Using analytics to track the payment behaviors of each mortgage client can help mortgage companies and servicers better understand the individual issues facing each mortgage client. In turn, this allows for intervention earlier in the process when borrowers are facing financial hardships or emergencies, and with an increased level of specificity.

While data is the signal, the response to that signal must be connecting the borrower with a well-trained mortgage servicing staff that understands how to build relationships with clients, offer personalized service and go the extra mile to make sure a homeowner's temporary financial hardship doesn't turn into a life-altering default.

For instance, by tracking payment data, servicing departments can be alerted to payment problems before they balloon into full-blown loss mitigation issues. If a homeowner's payment behavior changes, i.e., one who regularly pays by the first of the month starts paying later and later in the month, a servicing department might be alerted to the fact that a homeowner is struggling financially, but is still able to make mortgage payments.

An early call to the homeowner at this stage, with strategies specific to their situation, can help a homeowner overcome difficult but temporary financial hardships and get them back on track.

If a homeowner who has paid off a significant percentage of a loan begins showing signs of falling behind, loan servicing specialists can alert the homeowner to refinancing options that might resolve the issue.

A servicer that waits until the homeowner is 30 days delinquent to make contact might exclude the homeowner from refinancing qualifications.

Mortgage companies have access to a wide range of data that allows them to treat homeowners as individuals, including payment history, loan-to-value ratios and hardship report data. They used to lump customers into broad categories based on few data points.

With access to a broader swath of data thanks to updated regulation, servicers have the opportunity to accurately identify the precise loss mitigation issues and respond to a homeowner's individual situation within compliance guidelines. Treating customers individually targets loss mitigation efforts, which should make them more effective.

When representatives take a servicing call and understand a homeowner's situation, they can be more prepared with solutions and programs that will address the unique financial situation. The hardship might end in a loan modification or it could be some advice that gives the homeowner the help they need to get back on their feet.

These strategies are impossible without building on a technology platform that can handle millions of reports and analyze large amounts of data without overwhelming loan servicing staff with manual data tasks.

Investing in a technology platform that can scale and ingest more mortgage data as servicers grow their business is just as important for servicer compliance as using data and analytics is to provide a better consumer experience.

Rick Smith is the executive vice president of servicing at The Money Source Inc., a New York-based wholesale, retail and correspondent lender and servicer with offices across the nation.

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Loss mitigation Servicing Analytics Mortgage technology
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