Executive Vice President of credit portfolio management Terence Edwards said mortgage servicers need to adopt a high-touch method for dealing with delinquent borrowers in order to shield the company from more losses, according to written testimony
before the Senate Committee on Banking, Housing and Urban Affairs on Wednesday.
The committee is hearing a second round of testimony from regulators and industry heads on the ongoing issues in the mortgage servicing space, which range from foreclosure to modification.
Some of the 1,400 Fannie Mae-approved mortgage servicers practice various types of high-touch operations, which can include door knocking and hiring real estate agents to deliver documents to distressed borrowers. But Edwards called for a more focused standard of high-touch servicing.
"The servicer needs to assign one person for the borrower to work with who is accountable for that borrower until a resolution is reached," Edwards said.
The November issue of HousingWire detailed high-touch servicing initiatives as many businesses try to find a way to profit while implementing the strategy Edwards called for Wednesday.
"You have homeowners calling up the different servicers, and they get a different person every time," said Steven Gillian, executive director of the American Alliance of Home Modification Professionals
, a trade group of loss mitigation pros that has assigned a borrower to a single contact point for the loans it services.
Edwards also pointed out Fannie Mae's policy of a "single track" system in loss mitigation. Critics and consumer advocacy groups have complained that borrowers are put into the foreclosure process at the same time a modification is being pursued, known as "duel tracking."
Edwards said Fannie Mae's borrowers are on the home-retention track until they are more than three months behind on the mortgage. The Fannie Mae servicing guide allows servicers to delay putting a loan into the foreclosure process.
"Servicers may begin the foreclosure process in fewer days if the borrower is not communicating regarding a modification or foreclosure alternative," Edwards said.
He said this timeline exists because the longer the process takes, the further in arrears the borrower becomes reducing the likelihood of a successful modification.
"We know from our research that loans worked out earlier, rather than later, in the process are much more likely to succeed. On the other hand, each payment the borrower misses increases the likelihood of foreclosure," Edwards said.
Write to Jon Prior