Here at the MBA Servicing Conference in New Orleans, we're attending plenty of sessions. But the most interesting of the day was a Freddie Mac-led panel featuring vice president of servicing and asset management Ingrid Beckles, who said the GSE spent $12 million last year on loss mitigation incentive payments. Part of that program includes a pilot that pays foreclosure attorneys for identifying qualified borrowers and getting them in touch with the servicer before the foreclosure is completed -- a program that Freddie said today at the conference that it's expanding. Reuters' Lynn Adler covers the session:
The program started last year in fives states and will include 19 states that represent 85 percent of Freddie Mac's business, according to Freddie Mac spokesman Brad German. In 2007, the program helped about 18,000 borrowers whose loans were about as deep into the process as they could go to avoid foreclosure, he said. "I don't care if I compensate the attorney and the servicer for the workout -- it's better than a foreclosure," Beckles added. The aim is to modify loans to "truly viable homeowners" as much as possible, she said.
What wasn't covered is how the attorneys are absolutely ramping up for this business; many are opening up their own "loss mitigation departments" that replicate what loss mitigation pre-foreclosure does. Most traditional loss mitigation stops when foreclosure proceedings begin, something that the attorneys in the field now see as a key differentiator for their business. One large attorney group we know of -- LOGS -- already has an entire division dedicated to loss mitigation. Here at HW, while the thought of a foreclosure attorney leading up loss mitigation sounds kind of freaky-deaky, someone's got to do it. And it's clear at this point that the servicers don't have the capacity or processes in place to take it on. Editor's note: An earlier version of this blog post stated that LOGS performed loss migitation via off-shore facilities. While LOGS' principals maintain an active interest in a call center with offshore operations, company representatives say that the network performs its own loss mitigation directly via its attorneys and/or its domestically-domiciled HEART Financial Services division.