Loan Modifications Keep People In Their Homes

Written by Bernell K. Grier
on May 04, 2015 No Comments
Categories : Blog View

BLOG VIEW: The U.S. economy and the residential housing market may have recovered from the Great Recession, but there are still millions of borrowers around the country, thousands of them in the New York City area, who continue to struggle to pay their mortgages and remain in their homes.

Neighborhood Housing Services of New York City Inc. (NHSNYC), and its affiliated neighborhood offices throughout New York City, have worked for decades advocating for homeowners as they seek to buy, maintain and keep their homes. Thanks to programs such as the federal Home Affordable Modification Program (HAMP), many borrowers have been able to obtain loan modifications, including interest rate reductions and principal forgiveness, to help make their monthly payments easier to manage. It's not only good public policy, it's the right thing to do.

Over the years, our organization has worked with other community partners, financial institutions and servicers to provide suggestions on how to best serve our mutual constituents. Many of the financial institutions and servicers have listened and made improvements. These efforts have resulted in NHSNYC's foreclosure solution success rate, whereby clients have obtained loan modifications, forbearance arrangements and negotiated short sales, trending positive from assisting one in 10 families to one in three.Â

In 2013, NHSNYC began to actively pursue working with non-bank servicers as banks were migrating their mortgage platforms, and we were introduced to the leadership of Ocwen Financial.

Ocwen was one of the few servicers we found to offer innovative solutions such as the shared appreciation mortgage modification. NHSNYC counselors have informed me that Ocwen has been providing reasonable modifications that allowed for sustainable homeownership, including significant rate reductions and principal forgiveness.

As we continue to work with bank and non-bank servicers, we have found there is a movement among the investor community that precludes servicers such as Ocwen from continuing to offer these innovative solutions. From the beginning, principle reduction has been consistently attacked first as a moral hazard but now as a way that pits investor against struggling homeowner. The choice becomes the maximization of an investor's short-term profit versus the ability for a family to remain in their home. A longer-term investor outlook, we believe, will result in a win-win for all parties. Â

According to a recent independent research report by Morgan Stanley, Ocwen, which is the largest servicer of subprime mortgage loans, stands out in the industry as a servicer most willing to grant long-term loan modifications to keep borrowers in their homes. Although there are other servicers providing modifications, none is as aggressive on granting modifications as Ocwen has been over the years. Unfortunately, that's one of the reasons why Ocwen is being attacked by some of its investors that want principal reductions and modifications to end and have opposed the HAMP from day one.

Ocwen has indeed had its problems – but from my organization's experience, it is a changed company and not the same one I currently read about in the media. NHSNYC has nine foreclosure counselors who work with struggling homeowners on a daily basis. Among the non-bank servicers, Ocwen stands out as being one of the most reasonable.

Several times a month, NHSNYC and its affiliated neighborhood officers hold servicer forums whereby our counselors and servicers work together to meet with clients face to face. We know that this process works to provide a much needed service in the community. Ocwen has joined with us, sending representatives to work directly with our staff and our constituents.Â

In a recent homeowner outreach forum we invited Ocwen to meet with our clients. The staff from Ocwen were all originally from the New York City area and were multi-lingual. They were people who knew New York City. They were people our clients were comfortable working with. They talked to our clients about how they could save their homes.

We at NHS recognize that we need to do some additional work with servicers, as many have been clear that principal reductions are off the table. Instead, the loan ‘modifications’ some servicers offer borrowers added to their loan balance, rather than reduced it. This is not a solution. If you're a servicer working with struggling homeowners, you have to have people who are going to be responsive and have programs that help people who need it.

We at NHSNYC pride ourselves in advocating for solutions and working with financial institutions to make improvements that result in equitable results. We prefer to work with bank and non-bank servicers that are willing to work with us and come up with long-term solutions for our clients. As we continue to work in this arena, we extend the invitation to the investor community to engage in a dialogue with us. We believe that the solution lies in transparency, engagement and perhaps taking a longer-term view.Â

Bernell K. Grier is CEO of Neighborhood Housing Services of New York City, a U.S. Department of Housing and Urban Development-approved housing counseling agency.

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