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All Hands On Deck

Work with others to keep your clients in their homes

Lew Sichelman headshot
Lew Sichelman
All Hands

It’s no secret that borrowers don’t like it when their lenders, the ones they planned to pay, transfer their mortgages to third party servicers. But when a loan is traded from one servicer to another, it really yanks a borrower’s chain.

That fact was brought home again recently by J.D. Power, which found that the trust factor fell significantly when servicing is sold repeatedly. And that’s on top of the confidence people lose when the originator ships their mortgages off in the first place.

Power’s 2022 Mortgage Servicer Satisfaction Survey, which polled nearly 8,100 borrowers, found that their level of contentment slipped considerably — 130 points on a 1,000-point scale — when mortgages are passed off by the originating lender. And when loans are dispatched again, the satisfaction level sinks by 133 points more.

In total, that’s more than a 25% decline. And by that time, moreover, the level of satisfaction is only about half that of borrowers whose loans were written and administered by the same company, Power says. Indeed, after a mortgage was transferred, only 15 percent of those customers said they were “very likely” to consider using the original lender sometime down the road.

Hide, Not Help

Is it any wonder, then, that when a borrower finds himself in financial straits and is having trouble making his payments, no matter which outfit is collecting them, he tends to hide rather than come forward and ask for help? Even when the lender/servicer reaches out, borrowers tend to ignore them.

Part of that, of course, is that many borrowers think they’ll be able to rectify their situations all by their lonesomes. Another part is that some just bury their heads in the sand, hoping their problems will magically disappear on their own. But some folks just lose faith in the entire process, so much so they think they’ll just be spat upon again.

This all matters because more and more borrowers are finding themselves in financial difficulty of late. In August, the latest figures available as I am typing this on my old Royal Plus, foreclosure notices were filed against 34,500 properties country-wide, according to ATTOM, the real estate data company. That’s up 14% from July, and 118% from August a year ago.

Black Knight also reports that foreclosure starts bumped up in August. Repo filings were still about half what they were during the pandemic, but up, nevertheless. And it’s likely to get worse, according to LendingTree. By and large, most people are not behind on their payments, the lender-borrower matching service said. But nearly one million face the threat of foreclosure “in the next two months,” the outfit reported in late September.


Conventional Defaults

Not to beat this horse to death, but consider a report from Milliman, which now expects conventional mortgages to default at some point in their lifetimes at an increased rate. Already, the actuarial firm says the rate at which loans are late by 180 days or more is rising, mainly at the hands of cash-out refis.

All this begs the question: How can services reach borrowers? And better yet, how can the various players in the home buying process help?

It seems to me that realty agents and loan officers could very well play an instrumental role in bringing clients who have run into financial difficulty to the table to discuss their troubles and figure a way out. After all, there are numerous options available, if only borrowers would sit down and talk about where they stand.

So I asked two different servicing executives — Darrell Neitzel, vice president of operations at Sourcepoint, and Allen Price, a senior vice president at BSI Financial Services — how they can enlist a borrower’s agent or lender (assuming they are trusted) to speak to their former clients on the servicer’s behalf. Both indicated they’d welcome any help they can get.

Of course, you’d need to secure the borrower’s permission to reveal his loan status to his agent or lender, as Neitzel rightfully points out. But it says here that you don’t have to disclose any details when calling them to ask them to reach out to their former clients. Yes, it might be a tacit indication that something’s wrong. But as long as nothing is actually verbalized, it seems kosher to me to make that effort in order to help borrowers save their homes.

Neitzel said the most success he has had with this approach is when the underlying property is listed for sale. But still, he warns, “third-party authorization from the borrower is required for the agent to learn the details of the loan status.” And Price agreed. “Going around a borrower’s back and doing things they aren’t aware of won’t do the trick,” he said.


Line Of Defense

At the same time, though, Price believes a familiar presence might just help convince the borrower to speak with the servicer. Indeed, “receiving advice from a familiar voice is often the first step to trusting” the servicer, he said. That’s why agents and lenders might want to advise their clients in advance if they ever find themselves unable to make a payment — or even think they might miss a payment — their counsel is always available.

Tell them that the big bad mortgage company may be big but it isn’t so bad. Tell them the servicer is not interested in taking their homes away from them. Tell them the servicer will listen to their plight and offer different ways to help overcome whatever difficulties they may have. Tell them to give the servicer a call. And while you’re at it, tell them that servicing is transferred on almost every loan these days so they won’t be so pissed off.

The sooner servicers are able to make contact, the better, so every trusted advisor should not delay trying to help. “You want to reach a borrower and find the cause as early as possible,” Price told me. “It’s like a patient and his doctor; the sooner the diagnosis, the better chance there is for recovery. At the end of the day, building trust through empathy and education improves the chances of keeping borrowers in their homes, which is what everybody wants.”

You also can act as a first line of defense against unscrupulous mortgage relief operators who fleece unsuspecting borrowers out of millions every year. The Consumer Financial Protection Bureau has rules to do that, but Uncle Sam can’t stop them all. Like the guys the Federal Trade Commission and the California Department of Financial Protection want to stop from operating an alleged sham mortgage relief operation.

A federal court has temporarily shut down the operation and frozen the assets of the two defendants who supposedly targeted distressed homeowners with their deceptive claims in telemarketing calls, text messages and online ads, often promising that in just three months, they can get consumers’ mortgages modified. In some instances, they supposedly claimed to have ties to Uncle Sam.


All Hands On Deck

Not Legit

For what it’s worth, legit servicers shy away from social media when trying to make contact with bashful borrowers. BFI has found that tracking down borrowers through e-mails, texts and direct messaging doesn’t work because “consumers often find these methods suspicious and intrusive,” Price said. “Basically, it’s the opposite of building trust. In fact, they can even hurt a servicers reputation.”

Once contact is made, Sourcepoint operatives “steer away from starting calls with asking for a payment,” said Neitzel. The company starts by saying “we are here to help” and continues to emphasize that “we want you to stay in your home.” And Price said BSI has found that “the more we educate borrowers, the better chance we have to earn their trust and help them.”

That’s where trusted advisors can help as well. Though the specific details are best left to trained workout specialists, you can at a minimum tell your former clients that several different options are available to keep them in their homes, as are a couple of choices if they decide they can’t hack it anymore. At the very least, you can advise them that foreclosure is a process, not an event, that takes months or even years to complete. So depending on where they live, it could take a while.

Not as long, perhaps, as the California couple who hadn’t made a payment since 2009. They were finally kicked out of their $1.7 million manse this summer. But they lived, rent free, ever since their mortgage was modified 13 years ago. Obviously, these are not the kinds of borrowers who want help fixing their situations. But there will be thousands of others who need help. And it may just take a call from their agent or broker to push them along.

This article was originally published in the NMP Magazine November 2022 issue.
Lew Sichelman headshot
Lew Sichelman,
National Mortgage Professional Contributing Writer

Lew Sichelman has been covering the housing and mortgage sectors for 52 years. His syndicated column appears in major newspapers throughout the country. He also has been the real estate editor at two major Washington, D.C., dailies and spent 30 years on the staff of National Mortgage News, formerly National Thrift News.

Published on
Oct 27, 2022
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