February 2017 - Making Millennials Move

TheMReport — News and strategies for the evolving mortgage marketplace.

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46 | TH E M R EP O RT SERVICING THE LATEST O R I G I NAT I O N S E R V I C I N G DATA G O V E R N M E N T S E C O N DA R Y M A R K E T Borrowers and Servicers Reach Crossroads A recent white paper suggests using valuation reports to ensure properties are a good investment. T he mortgage and ser- vicing industry may be on the steady road to recovery, but servicers themselves are under intense pressure from investors and regulators to ensure a positive consumer experience. That's the sentiment behind a white paper titled Minimizing Servicer Risk with Pre-Foreclosure Reports by Ameri - can Tax & Property Reporting (ATPR) that urges servicers to find ways to manage foreclo- sures without disturbing the borrower relationship. According to ATPR, when a loan goes into default, the servicer "does not have the luxury of speaking in the aggregate and boasting about the overall fall in default rates. Indeed, the rate of borrower default has further to fall." One issue is that consumer advocates often falsely claim that investors benefit from foreclosure. "High default rates have a very detrimental effect on investors," the white paper stated. But moreover, the problem of default is even worse for ser - vicers. "As soon as a borrower be- comes delinquent," ATPR stated, "the servicer's costs increase and its work becomes more difficult." The communications break down when a loan goes into default and merely exaggerate the problems servicers are facing, ATPR reported. When a bor - rower misses a payment, commu- nication between borrower and lender becomes significantly more difficult. And the more delinquent the loan gets, "the more distant the borrower becomes, until the servicer finds continued commu - nication almost impossible." Even in the current market, where default rates are falling and the numbers of delinquent and REO sales are steadily decreasing, "servicers must remain constantly aware of the risk present in each deal they service, both on the borrower side and the collateral side," the report stated. The white paper suggested that servicers consider valuation reports, which the firm said gives servicers a good idea of what the property might sell for if the servicer is forced to foreclose. This, however, does not pro - vide enough information for the servicer to determine whether foreclosure makes sense. "For that," the white paper stated, "the servicer must have more information about the own - ers on the deed and any other liens present on the property." Pre-foreclosure reports, the paper concluded, provide the information an investor needs to mitigate risks, especially when dealing with portfolios of dis - tressed assets.

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