With re-default rates on the Home Affordable Modification Program (HAMP) approaching 28 percent, according to a new federal government report, Frank Pallotta, managing partner of Loan Value Group (LVG), says that a long-term solution will have to come from an entirely new approach by the mortgage industry.
“It is not enough to simply offer a modification to a troubled homeowner,” said Pallotta. “The key to long-term mortgage relief is the servicer’s ability to establish and maintain a relationship with the borrower over the life of the loan that goes beyond a simple monthly statement. The borrower’s capacity to perform in accordance with a mortgage modification agreement is directly proportional to their ability to be able to seek and receive assistance as needed.”
Traditional mortgage servicing and loss mitigation models have historically been reactive—even when the loan is considered high risk. LVG currently administers a variety of private label programs designed to maintain a 24/7 connection to consumers that ensures both borrower and servicer needs are being met.
“We will continue to see the trend of high re-default rates for the foreseeable future, unless the mortgage industry begins to explore proactive strategies that continually assess and re-assess the needs of all borrowers throughout the life of the mortgage,” said Pallotta.