Ocwen Sees Value in 'Prudent' Modifications
Subprime mortgage servicer and participant in this week's meeting of the minds on Capitol Hill Ocwen Financial Corp. (OCN) came out in vocal support of the Administration's push for all things modification. Representatives from 25 mortgage servicers participating in the Making Home Affordable initiative’s Home Affordable Refinance Program (HAMP) met in Washington this week to discuss how the program can be more effective. The HAMP distributes Troubled Asset Relief Program funds for servicer, borrower and lender/investor incentives on successful modifications initiated. The meeting, called for in a letter from Treasury Department secretary Tim Geithner earlier in the month, came at a time when industry groups including credit rating agencies are questioning how many homeowners HAMP will help. “We believe there is a general need for servicers to devote substantially more resources to this program for it to fully succeed and achieve the objectives we all share,” Geithner's letter read. In a corporate statement issued late Thursday, Ocwen said it supports efforts to step up HAMP modifications among servicers. It also rebutted some comments circulating around the mainstream media that servicers push mortgages through to foreclosure for lucrative fees. "While there have been suggestions that many servicers shun modifications because they're profiting by collecting late fees, we believe modifications are in everyone's interest," said executive vice president and general counsel Paul Koches. "In fact, late fees, which rarely if ever are collected in foreclosures, don't come close to covering the cost of advances that must be made -- out of the servicer's pocket -- to the owners of delinquent loans. We're convinced that prudent modifications are best for our homeowner customers, the owners of the mortgage, our business and our economy overall." Ocwen touted more than 90,000 loans modified to performing status since the onset of the subprime implosion. It so far has solicited 60,000 HAMP modifications. "We've put a lot of effort into ensuring that our loan modifications stick, meaning that the reduced monthly payment is both affordable by homeowner on a sustained basis while at the same time returns cash flow for the investor that exceeds foreclosure value," Koches said. "We do this via a complicated, proprietary process involving technology and financial models. This effort is paying off." Ocwen said its loan modifications bear a re-default rate of 24%, well below an industry average of 42.9%, according to federal regulators. Write to Diana Golobay. Disclaimer: The author held no relevant investments when this story was published.