A year ago, when the federal government began requiring mortgage servicers to have a single point of contact (SPOC) for defaulting borrowers, the intention was to maximize homeowners' eligibility for various loan modification programs. Of course, proper intent does not always guarantee a desired solution.
Even with a so-called ‘relationship manager’ providing the SPOC, getting borrowers to connect and then take needed action can require great effort. That's why what's really needed is a ‘single point of field contact’ – going to the borrowers' front door and working with them ‘in the trenches’ on their personal situation, to determine a resolution.
It is at that personal point of contact that proper support, assistance and guidance can mean the difference between successful loan resolution and a languishing, unresolved situation. This is why the recent $25 billion foreclosure settlement announced in February specifically required that SPOCs for troubled borrowers must, among other mandates, ‘make an effort to introduce themselves to their respective borrowers.’
That makes sense when you consider that the whole purpose of SPOC is creating and maintaining a productive relationship with the borrower – effective outreach is critical to that cause.
Finding the person listed on a deed, mortgage obligation or auto finance contract may seem straight-forward on the surface: Just identify the proper person, communicate with him or her, assess the situation and take appropriate action. The hard part comes in the implementation process.
Our industry's history shows that it is ineffectual to rely on automated phone calls in an effort to reach defaulting debtors – calls mostly go unanswered – or to send packages via the mail, sometimes to addresses that are no longer current. It has even become outmoded in this market environment to send a package of documents to a troubled borrower without personal follow-up to ensure that those papers are understood, signed and returned to the right party.
It's a simple equation: Single point of field contact, with a face-to-face component, brings a much higher level of engagement. In some cases, it reveals (maybe for the first time) that a family does not wish to remain in a property, or that it prefers to ‘opt out’ of any loss mitigation or loan remediation programs, regardless of how well intended.
For more proof of value, look at the April 2011 consent order requiring servicers to conduct foreclosure reviews, which require borrower engagement. In a year's time, just 3% of borrowers have applied for these reviews. In this same period of time, the U.S. Postal Service has returned and deemed undeliverable the banks' own foreclosure-related mailings at almost twice that rate. At least one bank still struggles to get systems in place for handling and testing borrower responses.
The old adage is true: Actions speak louder than words. Often when we talk to borrowers, they say they'd like to apply for loss mitigation assistance – but when action time comes, their minds change. Probably the single biggest reason people opt out is frustration with the process. An extended delay in getting help depletes their energy as well as their enthusiasm and motivation.
Here's the central point: Regardless of a servicer's strategy for SPOC, the added layer of face-to-face field contact helps lead the borrower to the proper place of engagement. It's one thing to have borrowers pick up the phone or answer the door, but it is another one entirely for them to sign paperwork and let their servicer know what they plan to do about a defaulted loan. This allows servicers to make quicker decisions about their assets and bring the loan to resolution one way or another.
Ideally, we would like to collect as many packages as possible and keep families in their homes, but if the borrower chooses to opt out, the servicer can provide the borrower with options such as a deed-in-lieu or a short sale.
In a study conducted on a population of defaulted U.S. Department of Housing and Urban Development (HUD) accounts, we tested the effectiveness of door-knocking on over 130,000 assignments. We reached 65% of them and learned that, if a borrower has any interest in loss mitigation, you have to collect the documents and get the ball rolling. Some 23,000 wanted the loss mitigation documents right there and then.
In the majority of cases where someone wants to move forward with loss mit, though, we can help him or her contact the servicer, complete documents and move the process ahead. We like bringing the good news of SPOC to someone's doorstep, where we can help.
But results are what counts. SPOC must be located on a two-way street (i.e., with borrower interaction); otherwise, the whole design is destined to fail.
Today's field contact work – a.k.a. ‘door knocking’ – is conciliatory and anything but confrontational, handled by professionals with some level of field experience (many of whom are retired police officers, notaries, military veterans, process servers and the like). They are a different breed from others doing similar work. We do not focus on recruiting real estate agents to handle these communications, simply because that may pose a conflict of interest when it comes to trying to keep families in their homes.
Even the nation's largest servicers have adopted a decentralized effort to engage borrowers, emphasizing a face-to-face approach on their own. JPMorgan Chase and Bank of America, for example, have customer-outreach centers geographically placed that proactively advance the SPOC intent, establishing times and places for face-to-face meetings with borrowers to review financials and set expectations. They understand that borrower contact needs to be done on a large scale, in different manners, if we are to have fewer people dropping out and avoiding foreclosures.
There can be no doubt that with all of the requirements, mandates, and guidelines servicers endure, they need partners they can count on to help ensure their efforts are successful.
Jay A. Loeb is vice president of strategic development at National Creditors Connection Inc., a Lake Forest, Calif.-based field services firm. He can be reached at firstname.lastname@example.org.