Posted on Thursday, February 25, 2010
Paul A. Koches, EVP, general counsel, and secretary of Ocwen Financial Corporation recently issued an interesting letter.
Koches' bottom line was that at many servicing shops the overriding financial incentive comes from "adhering to contractual obligations to service the loans, and resolve delinquencies, in the best interest of the investors. So, when a servicer’s metrics indicate a higher investor net present value for a modification than a foreclosure—which is often the case in this environment—the servicer is required to modify the loan." In other words, servicers are not opposed to modifications.
Koches blames to delays, in part, on the fact that so many traditional prime loan origination large banks have acquired subprime lending and servicing units and not been able to successfully integrate the subprime mortgage operation into their "prime cultures." I can say from experience that these are entirely different businesses and cultures. Subprime is far mroe “high-touch” sensitive among other things.
Koches suggests servicers work closely with community groups. He also believes in;
- "Working closely with Treasury to arrive at more flexible guidelines, so more distressed homeowners qualify for mortgage modifications under HAMP;
- Developing a national HAMP awareness and information campaign to increase homeowner outreach;
- Focusing more intensely on homeowners who are unemployed or under-employed and thus need state or federal assistance to qualify for mortgage modifications; and
- Encouraging greater collaboration between servicers and grassroots groups in providing real-time solutions for homeowners, including being more proactive about helping borrowers early on, before they face the prospect of foreclosure."