Mortgage Relief Program: Mortgage Servicer Impact On Consumer Credit Debt

If it’s broke, don’t fix it,” seems to reflect the current administrations response to the continued abysmal performance of the large Servicers in implementing programs to keep people in their homes. I recently spoke to a colleague at one of the Mega-Servicers who shared with me that out of the last 20,000 Home Affordable Modification Program (HAMP) packages sent to homeowners that only 400 of those packages resulted in a completed loan modification. Our firm’s analysis of the work-flow processes of the Servicers clearly demonstrates “large service and technology gaps” that explains why only a very small percentage of homeowners have actually benefited from loan modifications.

In fact, the Amherst Securities Group recently released figures showing that 80% of all nonperforming private-label mortgages have not been modified after 12 months and as of Sept. 30, 2010, that the Fannie Mae servicers had completed only 321,800 modifications including 158,800 restructurings that meet Home Affordable Modification Program (HAMP) specifications out of nearly two million note holders believed to be eligible for loan work-outs. Fannie has 60,500 borrowers in HAMP trials, which represents only 6% of its seriously delinquent loans. This discussion will focus on specific areas of the Servicer work-flow processes that contribute to the “large service and technology gaps,” in the way in which loan work-outs are initiated and processed.

The Acting FHFA Director Edward J. DeMarco revealed recently on December 2nd that the, “Servicer’s deficiencies undoubtedly reflect strains on a system that is operating beyond capacity and was never designed to handle the volume of nonperforming loans that we are seeing today.” He concludes that, “they also represent a breakdown in corporate internal controls and the integrity of mortgage relief program servicing and processing.” Of course, the recent scrutiny of Servicer foreclosure practices is further exposing Servicer inadequacies; clearly, the sheer volume of delinquent homeowners has put intense pressure on Servicers, including their loan workout efforts. With the John Burns Real Estate Consulting firm estimating that the “shadow inventory” of homes is headed towards 4.7 million foreclosures, it is obvious that Servicers must drastically overhaul their work-flow processes in order to have a fighting chance at creating some head winds against the growing momentum of REO inventories.

Home Affordable Refinance Program has been designed by the federal government to allow people with mortgage loans avail refinancing even if their homes are currently valued less than the mortgage they have taken. However, to avail this package one has to have a good credit history.

This program is intended for those borrowers who had trouble paying their mortgage after their rate reset to a higher rate. You must have a clean payment record for your mortgage during the six months before your rate reset. If any of those payments were late, you will not be eligible. You must be able to demonstrate the ability to make all future mortgage payments at the new rate, including sufficient income and employment stability. The home that the loan is for must be your primary residence. If the above debt solutions don’t apply to you, there’s no need to worry. Federal assistance isn’t the only way to reduce your debt. Educate yourself about all the options and improve your financial health today.

Learn more about Obama Mortgage Relief Plan Qualifications.

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