Ohio governor Ted Strickland on Monday announced non-binding agreements with nine key mortgage servicers over their loss mitigation efforts, touting the pact as a "historic day in the state of Ohio." The Dayton Daily News, which originally reported on the agreements, said that Strickland was joined by Ohio Mortgage Bankers Association president Bill Cosgrove in announcing the new pacts between the state and key servicers. From the report:
About 55 percent of Ohio home loans are with the nine companies, Kimberly Zurz, state Commerce Director said ... Cosgrove declined to comment when asked if the companies would have signed had the agreements been binding, with sanctions for violations. Strickland said the companies have put their "honor and prestige on the line." "No one said the Declaration of Independence was legally binding but a lot of people paid attention to it," Strickland said, quoting his legal counsel Kent Markus.
The pacts come as part of the state's "Save the Dream" homeownership preservation effort. Servicers agreeing to the pact included Carrington Mortgage Services, Citi, GMAC Residential Capital, HSBC Finance Corp., Ocwen Financial Corp., Option One Mortgage, Saxon Mortgage Services, Select Portfolio Servicing, and Litton Loan Servicing. The participating servicers have agreed to terms that will see them engage in "substantial and large-scale loan modifications" for adjustable-rate and subprime mortgage holders, as well as making proactive attempts to contact at-risk borrowers and establishing incentives for both staff and foreclosure counsel to modify loans rather than foreclose. The companies also agreed to report on their progress to the state's Commerce Department. Beyond the reporting on progress part, I don't really know what else here is really all that new. Substantial loan modifications, to the extent permissible under contractual obligations? Making efforts to contact at-risk borrowers? Incentivizing attorneys to find a workout prior to the foreclosure sale? These sort of things are -- at least on paper -- the very definition of modern loss mitigation in mortgage banking. I suppose the devil here ultimately lies in the details of how loss mitigation is executed. After all, we don't have any idea what the definition of a "substantial" volume of loan modifications is. Some of the servicers on this list are generally better at the loss mitigation function than others, because the systems, policies and procedures put into place at one shop can differ pretty significantly from the next. I won't disclose who falls where on the totem pole, or where each of the above shops differs in process -- but I will say that if agreements like this can reinforce an existing commitment, for borrowers and servicers alike, that's often a very good thing.