MBA's Kittle testifies on mortgage servicing MortgagePress.comMBA, David Kittle, mortgage servicing, House Financial Services Committee, Review of Mortgage Servicing Practices and Foreclosure Mitigation
David G. Kittle, CMB, chairman-elect of the Mortgage Bankers
Association and president of Principle Wholesale Lending Inc. of
Louisville, Ky. testified on July 25 before the House Financial
Services Committee. At the hearing titled, "A Review of Mortgage
Servicing Practices and Foreclosure Mitigation," Mr. Kittle
explained to committee members that servicers' and borrowers'
interests are typically aligned in avoiding foreclosure and working
together to help keep borrowers in their homes.
Below is Mr. Kittle's oral testimony, as prepared for
"Mister Chairman, Ranking Member Bachus, thank you for the
opportunity to appear before you again. I am pleased to discuss
solutions to the situation in the mortgage market, and what
servicers are doing to help keep families in their homes.
None of us wants a family to lose its home, and MBA members are
devoting significant time and resources to finding ways to help
borrowers keep their homes. The tools used to avoid foreclosure and
retain a borrower's home include forbearance and repayment plans,
advance claims, loan modifications and refinances. Short sales and
deeds in lieu of foreclosure are also used to avoid foreclosure in
It makes good economic sense for mortgage servicers to help
borrowers who are in trouble. The increase in mortgage
delinquencies and foreclosures has brought significant attention to
the costs of foreclosure to homeowners, communities and mortgage
While the impact of foreclosure upon homeowners and communities
is clear to everyone, statements by some advocates and government
officials indicate that confusion still exists about the impact of
foreclosure upon industry participants particularly lenders,
servicers and investors.
Mortgage lenders and servicers do not profit from foreclosures.
Every party to a foreclosure loses - the borrower, the community,
the servicer, mortgage insurer and investor. It is important to
understand that profitability for the mortgage industry rests in
keeping a loan current and, as such, the interests of the borrower
and lender are mostly aligned.
As a recent CRS paper notes, foreclosure is a lengthy and
extremely costly process for the industry and, generally, a losing
financial proposition. While losses can vary significantly, several
independent studies have found the losses to be quite significant:
over $50,000 per foreclosed home or as much as 30 to 60 percent of
the outstanding loan balance.
If a homeowner misses a payment and becomes delinquent, the
mortgage servicer will attempt multiple contacts with the homeowner
in order to help that borrower workout the delinquency. Servicers
have several foreclosure prevention options that can get a borrower
back on his or her feet.
Informal forbearance and repayment plans are the first tool
servicers use to help borrowers. Loan modifications are the next
level of loss mitigation options. A loan modification is a change
in the underlying loan document. It might extend the term of the
loan, change the interest rate, change repayment terms or make
other alterations. Often features are combined, including rate
reductions and term extensions.
Servicers also use refinancing to assist borrowers who are
current but are at risk of defaulting in the future or borrowers
who are in the early stages of delinquency. FHASecure is one
example of a program targeted to borrowers with adjustable rate
mortgages who are unable to make payments due to an increase in
The housing bill that just passed the House enhances FHA's
products by creating the "HOPE for Homeowners" program for
delinquent borrowers who need to refinance their homes, but find
they owe more than their homes are worth.
Servicers want to assist borrowers who are having difficulty
paying their mortgages. Servicers and investors have an economic
incentive to avoid foreclosure. As a result, servicers are
performing a growing number of workouts, including modifications,
as evidenced by the HOPE NOW Alliance data.
Servicers have increased staff, have funded new technology, are
sponsoring home retention workshops, are using third parties to go
to the borrower's home to facilitate the workout and are funding
advertising to educate borrowers about foreclosure prevention
They are paying for housing counseling so that they remain free
to the homeowners and are working with regulators and others to
resolve legal impediments to loss mitigation.
All these efforts demonstrate the industry's dedication to
avoiding foreclosure and help delinquent borrowers get back on
their feet. The industry is working to keep pace with changes and
seeking new and financially responsible ways to increase
The incentives of the mortgage servicer are generally in line
with the family who is in trouble. Thank you for the opportunity to
share our thoughts with the Committee."
Mr. Kittle's full written testimony can be found at www.mortgagebankers.org.