If nothing else, President Obama has good timing. Last week, when he laid out his Homeowner Affordability and Stability Plan (HASP), a wide cross-section of the very industry the plan most directly affects – the servicing industry – was gathered in beautiful Tampa for the Mortgage Bankers Association's National Mortgage Servicing Conference.
The president's midday speech in Phoenix attracted small crowds around the numerous televisions that adorn seemingly every corner of the Tampa Convention Center. Once Obama's speech ended and the cable news channels' coverage of the HASP spun into rinse-repeat mode, the crowds slowly dispersed and conversation began.
What was the reaction, you ask? Some ambivalent shrugs, plenty of skepticism and more than a few ‘devil's in the details’ comments. With the devil's arrival expected March 4, it's too early to pass judgment one way or another on the plan.
But as MBA President John Courson stated, the plan has some very visible drawbacks. HASP will only have limited success in situations where mortgages exceed property values by more than 5%. And it doesn't do a whole lot to protect modification-friendly servicers from lawsuit-happy investors.
On the other hand, Obama's plan does provide some actual servicer incentives, which have been missing from the loss mit picture for far too long. Michael Gutierrez, managing director of Standard & Poor's servicer evaluations, noted in a panel session at the MBA show that the economics of servicing must be restructured once the industry returns to normalcy.
‘It needs to be totally rebuiltâ�¦ I think servicing fees are inadequate,’ he said. ‘I think they were simply good when times were good.’ And times, of course, are no longer good; perhaps this is the first swing toward revamping the fee and incentive system.
In addition to incentives, HASP may expand on the list of best practices offered by HOPE NOW and improve the clarity of loan modification guidelines. (The success of this depends greatly on what remaining details are unveiled next week.)
But while it's easy to begin listing the pros and cons of this as-yet-implemented plan, taking a serious look back at existing foreclosure prevention efforts is not a bad idea.
That appears to be what the House Financial Services Committee had in mind Tuesday when it called a veritable all-star team of default servicing professionals to the Rayburn House Office Building in D.C. to discuss loan modifications. Government agencies and regulators (e.g., FHFA, HUD, OTS, OCC) were represented, as were servicing shops – Ocwen, Wells Fargo, Bank of America, JP Morgan Chase and Citigroup all testified.
Patrick J. Lawler, chief economist with the FHFA, provided an update on the government-sponsored enterprises' Streamlined Modification Program. Some 90,000 solicitations or modification offers have been sent out, and the first wave of responses are now trickling in.
"Early indications are that several of the program guidelines should be liberalized to reach a broader population and to create a lower, more affordable payment," Lawler testified. Anyone else reminded of Hope for Homeowners? (Speaking of which, I encourage you to check out the new H.R.1106 legislation, which combines H4H reform, cramdowns and servicer safe harbor provisions.)
If you would like to view the above testimonies, visit the Subcommittee on Housing and Community Opportunity Hearing page. It's worth a look.
– John Clapp, Servicing Management