Richard Cimino, currently the CEO of iServe Servicing
, a recent HAMP participant, is responsible for building, managing and establishing client relationships in the mortgage servicing division.
Cimino's past executive experience includes serving as president of the servicing division for New Century Mortgage for 10 years ending in June 2007, and was responsible for building all loan servicing operations for the number two sub-prime lender in the nation.
For this episode of In This Corner, Cimino let's us know what he would change about the program.
What improvements would you like to see to the HAMP program? Obviously, there are the recent principal write down guidelines in place now. Is there another change you would like to see to the modification program?
While HAMP is a very strong program, there are always areas for improvement. In this case, I believe that there needs to be resolutions to the program. One of them would be early identification of borrower intentions and abilities – whether or not the borrower actually wants to or can afford to stay in the property and identification of the exit strategy early in the process. In other words, is there going to be a short sale, deed-in-lieu, or just take it to REO? That might be a good way to get some quicker resolutions to a lot of these properties. iServe Servicing is set-up and licensed to handle any and all of these resolutions.
How does a HAMP modification affect not just that particular borrower but even borrowers right next door?
Aside from the logistics that move the refinance mechanism, there’s a situation of putting values at risk throughout the country. If you have one in seven borrowers in default or headed for default, normally only two or three may actually remain in their homes. With that assumption, the values of properties begin to come down, not so much from the REO scenario, but from the principal reduction scenario. Consequently, all values across the board go down in the long term, which then reduces the values of all the properties in the neighborhood. As a result, all seven borrowers are impacted – even the borrowers who are keeping their mortgages current.
At a very granular level, what is the major difficulty servicers are having when trying to solve these loans with borrowers?
There is a huge difference between a special servicer like iServe Servicing and a mega-servicer. The mega-servicers are dealing with hundreds of thousands of loans, some with legacy pricing and procedures established when delinquencies were very low. That applies to subprime, Alt-A and prime. Their biggest problem is the response rate that they’re getting through HAMP. When they do get contact with a borrower and engage in a pre-qualification scenario, up to 70% of the borrowers that are interested don’t bother following through with the required documentation. Due to the pricing structure that’s in place in the legacy servicing agreements, the servicers cannot put the staffing in place that’s necessary to deal with the volumes. With the mega-servicers, there is not a lot of follow-up in what we call the “backroom process,” like the paperwork gathering or the actual underwriting once the documents are received. A special servicer like iServe Servicing is properly staffed to handle the volumes of defaulted loans.
And what advantage does a special servicer like iServe Servicing have?
We have the experience, industry-knowledge, advanced technology and size to offer tailored solutions. When you look at a mega-servicer, the amount of files that one of their loss mitigation people is handling could be anywhere from 350 to 1,000 loans. iServe Servicing handles 150 to 200 files per workout person. This allows us to adequately service each loan by giving it the time necessary to obtain a successful modification or other appropriate resolution. Many borrowers are confused and scared by the process and we can offer the “hand-holding” to walk the borrower through the process to a successful resolution.
In addition, our business efforts have expanded into working as a component servicer to some of the mega-servicing institutions. We would go in and say, “iServe Servicing would like to get involved in offering you solutions to your full servicing operation and/or resolution to your volume overflow through our component servicing group. We have a dynamic business model which includes origination, REO, and an advanced technology platform that allows us to offer customizable solutions to our clients.” This can be a relief to a mega-servicer who is overwhelmed with the volume and is happy to have an outlet for part of the servicing process.