All posts tagged mortgage

Mortgage Collections Stuck in Neutral

by Brian Moore on March 30, 2012 in Brian Moore, Mortgage, Varolii News with No comments
Mortgage_Stuck_in_Neutral

A couple of studies released yesterday confirm what anyone involved in collecting past due mortgage loans already knew.

It's a hard job and it's not getting any easier.

CoreLogic reported that 90-day plus delinquency rose in February to 7.3%, an increase of 10 basis points over January. One would have hoped that with tax refunds starting to show up by the end of the month, at least some of that money might have gone toward the mortgage.

But that would have required the reversal of another trend, the tendency of borrowers to pay their credit cards and auto loans ahead of their mortgage. TransUnion reports that the inversion of traditional payment priorities that began in 2008 stubbornly persists in 2012:

"Though the percentage of consumers delinquent on mortgages and current on credit cards has dropped in the last year, the payment hierarchy shift is as strong as it was one year ago, with consumers opting to pay their credit cards before their mortgage payments," said the study's co-author Matt Komos. "We established in our earlier study that this payment hierarchy reversal was chiefly the result of two factors: the decline in house prices and high and persistent unemployment levels."

Since neither housing prices or employment appears likely to improve significantly in the next year, mortgage servicers are challenged to keep their portfolios from deteriorating further through more effective collections strategies.

The GSE's think one way to do this is by accelerating the start and increasing the pace of collections treatment. Their Servicing Alignment Initiative (SAI) requires servicers to begin their attempts to contact past due borrowers on the third day of delinquency and continue every third day with multiple attempts throughout the day until they achieve a quality right party contact (QRPC). While there is allowance for delaying the effort for borrowers scored as low risk, this is a more aggressive treatment timeline than was common prior to the recession and bursting of the housing bubble.

So how do you get this extra work done with flat or decreased budgets for collections, driven in part by the need to also fund major increases in loss mitigation staff to support single point of contact (SPOC) and other foreclosure prevention mandates? One cost-effective way is to shift the burden of outreach off of collections staff and onto hosted borrower interaction systems that use interactive voice messages, email and SMS text to initiate dialogs with borrowers.

If you'd like to learn more about this approach, post a comment below. Or if you'll be attending National Mortgage News Mortgage Servicing Conference in Dallas April 17-19, come to Varolii's Industry Innovation luncheon and we'll show you how we help five of the top 15 servicers get out of neutral and into high gear.

Mortgage Bankers Occupy Rush Street

by Susan Casella on October 11, 2011 in Industry News, Mortgage, Susan Casella, Varolii News with No comments

I'm in Chicago this week where the Mortgage Banker's Association (MBA) is holding its annual conference and while the occupation of Wall Street is getting most of the headlines, these proceedings are no less newsworthy.

In fact, its not too much of a stretch to say the efforts of this group meeting in the Windy City could help address many of the grievances emanating from the south end of the Big Apple. After all, as the MBA President and CEO Dave Stevens put it in his keynote address:

“We are the work force on the ground 24/7 for those critical programs that cost the government next to nothing but mean so much to so many Americans. Those programs would still be some dusty pages in the Congressional Record if mortgage bankers--like you and me--hadn’t found a way to bring them to life. We make the dream of homeownership happen. That’s what we do. Mortgages are a bunch of rules and red tape until we turn them into something real with a front door you can walk through.”

While Stevens took responsibility for the industry's failures and excesses that contributed to the downturn in the housing market, he also challenged those looking to fix these problems with increasingly restrictive regulations:

“They figure if they outlaw a list of mortgage products or micromanage underwriting guidelines, then housing markets will never again get out of sync. They see the market as simply in need of a tough new cop on the beat who will outlaw things that could even remotely lead to future problems. But those of us who have been in the industry for years know that it is just way more complicated than that. For many of these outlawed products there are families who will be denied homeownership even though they qualify and need some of these flexible guidelines in order to meet different employment and income patterns. The key here is to ensure that the borrower really understands the loan they are getting and that they can sustainable make their payments.”

Looking ahead to how mortgage bankers will work with the next generation of home buyers, the thirty year industry vet echoed the self-service mantra regular readers of the Varolii blog will recognize as our raison d'etre:

“We will help them in ways that they want to be helped. These young buyers have grown up in a marketplace where they have learned to transact in a self-service model. They are used to doing the research on products and providers. So when it comes time to buying a home, they will set the terms for the services we provide, but the whole thing must be built on trust. These are challenging times for American consumers and this effort reflects our deep commitment to putting America back on strong financial footing--one customer at a time.”

If you are at the conference and want to learn more about how Varolii is working with to help the mortgage industry do just that, come see us at booth 2202.
mba booth1 Mortgage Bankers Occupy Rush Street

Banks Report Fewer Accounts Past Due - Why This Is Not Necessarily Good News

by Brian Moore on August 18, 2011 in Banks/Finance, Brian Moore, Mortgage with 5 Comments
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TransUnion reported this week that in the second quarter of 2011 the number of US credit card accounts that are seriously delinquent (>90 days past due) dropped to its lowest level in 17 years. This continues a trend that began six quarters ago, bringing the rate down to 0.6%, nearly 40% lower than it was this time last year.

So why is nobody smiling?

If you're a consumer, you've probably got concerns about the economy and your job, and as a result you are reducing your spending with both cash and credit to save for the forecasted rainy day. After all, it’s a lot easier to keep a smaller credit card account up to date, but this does not necessarily mean you are happy doing so.

If you are a card issuer, the lower delinquencies translate to lower future loan losses, which is a good thing. But when it comes as a result of customers reducing their borrowing, it means lower income from interest and puts increased pressure on bank operations (like collections) to do things more efficiently. So you are not happy.

And if you happen to also be a mortgage lender, the news is even worse. In contrast to the improving trend in credit card delinquency, the number of past due mortgages continues to climb. According to Lender Processing Services, the number of mortgages over 30 days past due has increased by 3% in the past two months. This means mortgage servicers have even more work to do as they implement the aggressive outreach to delinquent borrowers mandated by Fannie & Freddie's revised servicing guidelines.

No wonder everyone is grumpy. For me, that's strong motivation to take a look at operational strategies and tactics and adapt them to these new dynamics:

  • Consumers should take advantage of their reduced debt loads to improve their credit scores by paying every bill on time. If you've not already done so, get enrolled in your creditors auto-debit programs so you never miss a due date. And if your credit is already excellent, think about re-financing your mortgage at the lowest interest rates in modern history.
  • Credit card issuers should be sure to leverage their customer's increased awareness of their credit standing by treating delinquent accounts early in their aging, before it is reported past due to the bureaus. When you do, be sure to mention the positive  impact prompt payment can have on credit scores to incent the customer to pay today.
  • With the increased workload required by the GSEs, mortgage servicers must automate their customer outreach, using digital interactions such as interactive voice messages, SMS text and email to lead customers into profitable action. Even if the outcome is forbearance or loss mitigation rather than payment, it’s better than allowing the delinquent borrower to hide from the obligation and delay the inevitable day of reckoning.

In Search of SPOC - "Single Point of Contact"

by Brian Moore on June 3, 2011 in Banks/Finance, Brian Moore, Mortgage with No comments
SPOC

When I sold my first predictive dialer for collections in 1986, one of the major objections I had to overcome was that efficient use of the system required my client to abandon "account ownership" by his collectors.

In this scheme, each collector is assigned a specific set of delinquent accounts, typically numbered in the low to mid hundreds. The collector would be responsible for these accounts "from cradle to grave".

Many collections managers loved this arrangement, as it allowed them to easily measure a collector's effectiveness. All dollars collected, every account cured, every write off recovered would have been due to the effort of the collector as they were the only ones to touch their accounts.

Unfortunately, for a predictive dialer to deliver its benefits, the direct relationship between an individual collector and a specific set of accounts had to be severed. This allowed the system to dial ahead on behalf of a large team of collectors, screen out no answers, busies and answering machines, and connect the longest available collector to the next answered call. Productivity measured in customer contacts per hour increased 300-500% or more, allowing for the ratio of accounts to collector to rise to more than 1000:1.

With gains like that, only the most hard core advocate of account ownership was able to resist this compelling new technology, and the predictive dialer quickly became standard operating equipment for collections.

Fast forward 25 years, and as Yogi Berra might say, "it’s deja vu all over again". Only in reverse.

Reacting to borrower complaints about being unable to get consistent, accurate information about modifying their mortgage from the variety of representatives they might speak with at their servicer, various regulators are in the process of imposing"single point of contact" (SPOC) requirements on the mortgage servicing industry.

While the actual rules are still emerging, all indications are that at some point in the aging of a delinquent mortgage (and possibly even before the loan is past due), servicers will have to assign a Relationship Manager as the SPOC for a borrower seeking assistance with payment of their obligation. In other words, account ownership is back.

Since the predictive dialer is ill equipped to function efficiently unless any answered call it makes can be connected to any available representative, once an account is assigned to a Relationship Manager, servicers are going to struggle to use these systems to help deliver the high volume of contacts required in working through the modification process.

Enter Varolii

Our high quality, interactive voice messaging applications are more than capable of taking on the outbound contact work required. Many of the outbound calls during the modification process are made to provide the borrower with status updates or to make requests for specific documents. These calls do not necessarily require a conversation with a representative, but if the borrower requests to speak with their Relationship Manager, Varolii can facilitate a conversation with the borrower's SPOC.

Closing Thoughts

The SPOC requirements are forcing a significant and demanding change to the mortgage servicing industry at a time when they are already operationally stressed by the record high numbers of delinquent mortgage loans and the ever changing government mandated programs for borrower assistance. That said, the servicers I have spoken with say that the current system of pooled accounts is not well suited to working through the multi-stage process of loan modification and loss mitigation. Both the borrowers and the representatives are frustrated with the lack of continuity and the resulting opportunity for confusion and delay.

So servicers are actively engaged in reorganizing their processes. They are looking for solutions that will improve their productivity and hold down costs, just like they were twenty five years ago. Since Varolii has SPOC-ready applications, the only difference is I don’t have to convince them to abandon account ownership in order to help them.

Instead, I’m going “in search of SPOC”.

 

Strategic Defaulters and Cash Flow Managers

by Brian Moore on April 8, 2011 in Airlines, Banks/Finance, Brian Moore, Consumer Svcs, Healthcare, Mobile/Telcom, Retail, Utilities with No comments
Bank

According to a study by Experian, the recession and housing market meltdown has spurred some borrowers to behave in unexpected ways - so different in fact they have come up with category names: Strategic Defaulters and Cash Flow Managers.

Strategic Defaulters are borrowers with prime or even super prime credit ratings that choose to default on their mortgage, not due to a loss of a job or some other catastrophe, but because they are under-water (house worth less than the mortgage) on their loan. These folks are treating the home loan like it was a bet on a Continue reading →