ResCap's Marano Expresses Support for Loan Mod Plan
Bucking a trend of some criticism, troubled mortgage lender Residential Capital LLC, a GMAC Financial Services unit, said earlier this week that the "streamlined modification plan" rolled out by the Federal Housing Finance Agency, involving Fannie Mae (FNM) and Freddie Mac (FRE) would be a source of "much needed flexibilty" for the firm's servicing operations. ResCap CEO Tom Marano said in a statement that he hopes third-party investors will follow the same guidelines on loans that his firm services. "We encourage other mortgage investors to follow the example of the HOPE NOW, the GSEs and industry-leading servicers such as ResCap to adopt more flexible loan modification guidelines. Such efforts will help to preserve homeownership for willing and qualified home owners, and will stem the toxic effects that rising foreclosures have on our communities," he said. ResCap could certainly use the help. While the company has put 251,000 borrowers into loan workouts this year, the firm's contact rate stands at just 14 percent -- a number that is in line with other large servicers, man of whome say contacting a troubled borrower is by far the largest hurdle to preventing foreclosure. The firm also has held 4,300 face-to-face counseling sessions with troubled borrowers this year, Marano said, in an effort to find a solution to keep borrowers in their homes. ResCap is the fifth largest mortgage loan servicer, handling more than three million loans -- but its own future remains in doubt, given mounting losses on loan gone bad. The lender/servicer posted a $1.9 billion loss during the third quarter, and GMAC has said that without outside investment, ResCap may not be able to survive. At the end of the quarter, ResCap’s servicing portfolio stood at $426 billion, while on-performing assets (including REO) totaled $8.5 billion. The comments of support for the SMP come after some surprising criticism of the plain from Federal Deposit Insurance Corp. chairman Sheila Bair, who said earlier this week that the plan “falls short of what is needed to achieve widescale modifications of distressed mortgages.” Write to Paul Jackson at email@example.com.