Servicers Dissect HAMP, Short Sales at Loss Mit Conference
While Home Affordable Modification Program (HAMP) often gets a bad rap in the press, panelists at the loss mitigation conference in Dallas Thursday were less inclined to call the program a failure although they pointed to some weaknesses. “I think overall it’s working really well for the borrowers, although there’s a lot of bad press around it,” said Bryan Bolton, senior vice president of loss mitigation with Citigroup (C). But it’s also meant more work for servicers, he said. “It has increased a lot of touch points for us. We’ve had to add a lot of staff,” Bolton said. Bolton was one of four panelists at SourceMedia’s “Best Practices in Loss Mitigation” conference in Dallas Thursday. The panel, which discussed HAMP, HAFA and other loan modification options, was moderated by Kathy Castle, managing associate with Auriemma Consulting Group in New York. Reporting and tracking requirements for HAMP changed almost on a weekly basis early in the process, said GMAC’s Katie Brewer. Now that it’s been in place awhile, loss mitigators have established more of a rhythm with the program, she noted. Brewer is vice president of loss mitigation with GMAC ResCap. For smaller servicers, the overall cost of added documentation required by HAMP has been more onerous, panelists noted. While success rate for HAMP hasn’t been what the government or servicers hoped, changes that made along the way will help improve it, but the continuous changes are also part of the frustration in trying to manage the program, said Mark D. Spangler, assistant vice president, section manager, with Huntington Home Savers Group. The group is part of Huntington National Bank. Longterm, HAMP “wasn’t meant to be an end-all, be-all” and there are many other programs out there to assist borrowers, Brewer said. Some borrowers are clearly unable to afford modifications, as a result there’s been a growth in short sales and other programs, panelists noted. “It’s becoming a substantially larger part of our liquidation,” said Patrick DellaValle, vice president at RoundPoint Capital Group. The firm has been ratcheting up its incentive compensation for short sales, he noted. “It’s a win-win for both the servicer and the borrower,” he said. At GMAC, the firm is looking at denied and failed modifications and seeking to get borrowers into short sales, but such discussions with borrowers can be very difficult, Brewer said. GMAC has a specialized group to work with borrowers through the short-sale process, including connecting them up with real estate brokers in their area. “We’ve really worked to handhold, and we’ve added some technology to streamline the process,” she said. Bolton said Citigroup is offering fairly aggressive incentives to encourage borrowers to go the short-sale route, but isn’t getting many takers. Borrowers realize they have a timeline of about two years before a foreclosure works its way through the system, he said, so they are opting to stay put. Outside of HAMP, lenders are coming up with some of their own innovative programs to reach borrowers who may not qualify for the strict debt-to-income ratio that HAMP uses to determine qualification. Spangler, at Huntington, said the bank has seen some success with taking its loss mitigation group and splitting it up into specialties. The bank has a GSE team, a bank-owned portfolio group and a consumer group for second mortgages. Another team looks only at short sales. The idea is to reduce the borrower handoffs, he said. RoundPoint has customized modification programs that include looking at residual income. The firm considers both principal forbearance and principal forgiveness as “carrot” incentives to get borrowers into an affordable payment and to restore equity. Looking at a borrower’s cash flow is key in considering private modification programs, panelists said. Going forward, DellaValle said he expects to see lower ratios of loss mitigators to borrowers for more individualized attention. Servicers also need to consider some credit counseling for borrowers, many who have too much debt with expenses ranging from multiple car loans to premium cable channels. “There’s going to be a focus going forward on spending more time with each borrower,” DellaValle said. Write to Kerry Curry. Disclosure: the author holds no relevant investments.