REQUIRED READING: Borrower communication has long been a sore spot for the servicing space, and the foreclosure activity of the past three years has only exacerbated the attendant headline risk of failing to effectively work with borrowers who are struggling with mortgage debt. To protect against such risk, servicers are taking multifaceted approaches to borrower contact, including a mix of call centers, in-person outreach and creative mailers.
Some servicers are more successful than others in getting their messages across to borrowers, as highlighted by the results of a recent survey commissioned by the Pennsylvania Association of Realtors (PAR). The survey, which polled 500 Pennsylvanians who had encountered foreclosure in the past 12 months, revealed that the majority of respondents had little or no understanding of the loss mitigation options available to them. (Sixty-seven percent of respondents had never heard of the federal short sale program, while 57% had never heard of Making Home Affordable.)
Worse yet, the survey confirmed that borrowers feel frustrated when communicating with shops. More than 90% of those surveyed said they attempted to contact their servicer about solutions for avoiding foreclosure. Thirty percent said contacting their servicer "made no difference," and 19% said it "made things worse."
"We find borrowers are jaded by the current environment," says Wade Comeaux, president of Chicago-based special servicer Fay Servicing. "We take over portfolios, and borrowers are frustrated because they've reached out to servicers and haven't gotten a suitable response. In our first conversations, we often have to make a lot of effort to re-engage borrowers."
Fay Servicing boasts a 90% borrower contact rate, which Comeaux says is the result of several different outreach efforts. The company's model allows for a single point of contact, meaning each borrower works with only one loss mitigator throughout the process, limiting the likelihood that a borrower receives mixed messages (Fay Servicing aims to keep the number of files per employee below 250). Additionally, loss mitigators are instructed to give borrowers their cell-phone numbers and e-mail addresses.
Among the contact strategies employed by Fay Servicing is in-person outreach. The company works with several door-knock companies, vetting each vendor to ensure its insurance allocations and debt-collection licenses are in order. Although the composition of door-knock companies' service offerings has changed in recent years to include more document collection and borrower education services – largely in relation to the federal modification program – Comeaux says Fay Servicing uses its partners strictly to establish contact.
"We don't want that person to be the voice of Fay Servicing or our clients," he explains, saying outreach vendors perform warm transfers, connecting borrowers with the shop's loss mitigators.
Fifth Third Bank is another servicer that leverages door knocking, albeit through a mix of outsource providers and in-house staff. Although the bank uses in-person contact in markets where it does not have a high concentration of troubled loans, other markets – like Florida – call for a more intensive approach. And for Fifth Third, that means turning to internal staff, Jon Meade, vice president of loss mitigation, explained to SM earlier this year.
"Door knocking's been a win, even with the third party, but our performance on our internal process has had better success," Meade said.
The comparison is not apples-to-apples, as Fifth Third's agreement with its door-knock company limits the service provider's outreach opportunities to three home visits (once on a weekday, once on a weeknight and once on the weekend). The bank's field staff, on the other hand, are salaried employees who are instructed to keep returning to a property until the loan becomes current, the borrower tells them to stop or the property goes into foreclosure.
With the higher number of allowable visits, however, comes a better contact rate, Meade said.
"A lot of our analysis is applied comparing dollars spent to credit loss value," he stated. "If I spend $100,000 on an outreach program, and I can show that $100,000 yielded $1 million saved, that's smart money. With our field staff, we're getting a payback of that and then some."
Although the results of the PAR survey indicated a low awareness of foreclosure prevention programs among borrowers in Pennsylvania, Patrick Carey, CEO of Titanium Solutions, observes that many homeowners are, in fact, far more sophisticated than in years past about the various directions in which a defaulted loan can go. Titanium is among the vendors in the space that have broadened their services to include Home Affordable Modification Program document collection and perfection.
"When we go out to the home today, borrowers are much more informed about the process and that someone may be coming to their home to make contact," Carey says.
Servicers are also tapping door-knock companies to reach out to borrowers earlier in the delinquency cycle, visiting no-contact borrowers when they are 45 or 60 days past due, as opposed to 90 or 120 days, Carey adds.
In addition to collecting missing documents and making initial contact, door-knock companies have started to offer services to help servicers facilitate short sale and deed-in-lieu (DIL) discussions with borrowers. National Creditors Connection Inc. (NCCI) recently opened a short sale desk, which servicers can use as a means of identifying strong prospects for non-home-retention solutions. The service works well for the borrower population that is both hard to reach and unlikely to qualify for the majority of servicers' loan modification programs because their properties are not owner-occupied, according to NCCI Vice President Jay Loeb.
"Historically, it's been that if a borrower is not talking to us and the home is not owner-occupied, we're going ahead and moving to the foreclosure bucket," he says. "Now we're actively pursuing short sales and deeds-in-lieu."
Comeaux says Fay Servicing is very aggressive in trying to enter a DIL agreement with borrowers whose homes are not owner-occupied, although the point at which a property's true occupancy status is discovered typically occurs when an agent performs an interior broker price opinion. Companies like NCCI are attempting to serve the same function, and then some.
Loeb says the most successful strategy for servicers looking to use door-knock companies as short sale liaisons is to perform the loan analysis up front. Doing so enables door-knock agents to know exactly what a servicer can offer a borrower for a DIL or short sale.
"Having that specific talk-off with the borrower in the field or to our call center has been very helpful in getting our fulfillment rates up," Loeb says. "You really have to have something strategic to offer them in order to get them engaged."
Financial Asset Services (FAS) views door knocking as going hand-in-hand with servicers' short sale and DIL programs, according to Jeffrey Flory, FAS' business development manager. The company, which provides title curative, valuation and asset-disposition services, recently launched a door-knocking service. The idea was born out of a request from a valuation client whose borrower base was increasingly "going dark."
Flory says that once borrowers begin shying away from servicers' contact efforts, it becomes easy for the homeowners to lose sight of foreclosure alternatives like short sales.
"I think a lot of borrowers get to the point where they avoid calls from collections, and they may not be aware there are options outside of the foreclosure process for them to leave the property," he says. "Having that neutral, third party there to say there are other options available will open doors to moving the property more rapidly than through the foreclosure process."