Assist2Sell

Mortgage servicers are growing more and more creative in outreach methods and door-knocking services in an attempt to enter distressed borrowers into workout plans, according to speakers at the sixth annual Texas Mortgage Bankers Association (TMBA) Southern States Servicing Conference.  Rick Roniger, executive vice president and chief operating officer at Westlake, Texas-based First American Loss Mitigation, said servicers used to mail outreach packages with return envelopes included. But when that method failed, servicers turned to increasingly creative rewards-based outreach programs.  These “gimmicks” included mailing coffee mugs with single-serving-sized packages of coffee grounds to borrowers with notes encouraging them to “sit back, relax” and fill out the information about their late mortgage payments, Roniger said.  Soon, servicers sent out field units to engage in a door-hanger service to encourage borrowers to contact their mortgage companies if they had tro
 uble paying.

Door-hanging services soon became door-knocking services, which ultimately produced occasions of field agents knocking on borrowers’ doors and physically handing them a phone to call their servicers.  “If we can talk to people, we can usually reach a workout deal,” said Brad Staley, managing director at Irving-based iServe Servicing, who also spoke at the TMBA conference.  He noted the main challenge in resolving extremely distressed, low-value assets is making contact with the borrowers and maintaining that contact once a workout plan is initiated. Some field services go so far as to knock on borrowers’ doors after normal business hours and on weekend mornings, as well as stake out in cars in front of houses for up to an hour or until the borrowers return home.  If the borrower responds to the outreach efforts, a workout plan can be reached 85-90% of the time, Staley said.

According to the latest Campbell/Inside Mortgage Finance Monthly Survey of Real Estate Market Conditions, last month distressed properties – those involving homes acquired as part of a foreclosure or pre-foreclosure sale – accounted for 48.1% of the home purchase transactions tracked by the survey.  The February numbers were up significantly from the 37.3% level recorded as recently as November. It was also the highest distressed property market share seen since last July.  Stepped up government efforts, including temporary foreclosure moratoriums and a push to qualify more financially troubled homeowners for mortgage modifications, temporarily reduced the number of distressed properties coming on the housing market in the fall and much of this past winter. But now a growing number of distressed properties appear to be hitting the housing market.  There are three major types of distressed properties: damaged REO, move-in ready REO, and short sales. During the period from November to February, sales in all three categories rose. Damaged REO grew from 12.3% to 14.4%; move-in ready REO grew from 12.6% to 16.6%, and short sales grew from 12.4% to 17.1%.  “Short sales now account for the No. 1 category of distressed property,” commented Thomas Popik, research director for Campbell Surveys. “Losses on short sales are typically lower than for REO, and both lenders and the government are pushing programs to facilitate short sales. But as more and more people default or simply want to walk away from their properties, mortgage servicers are having trouble expeditiously processing these complicated transactions.”

Fannie Mae has quietly announced a deed for lease program that enables homeowners who are in financial trouble and face foreclosure to turn into tenants by leasing the property from Fannie Mae and turning the property deed over to the lender, basically giving the house back.

According to Fannie Mae anybody who is not eligible for loan modification can take advantage of this program. It will keep families in their homes during a transitional period, and helps to stabilize neighborhoods and communities.

The new program is designed for borrowers who do not qualify for or have not been able to sustain other loan-workout solutions, such as a modification. With the deed for lease program, borrowers transfer their property to the lender by way of a deed in lieu of foreclosure, and then lease back the house at a market rate.

To participate in the program, borrowers must live in the home as their primary residence and must be released from any subordinate liens (2nd mortgages, equity lines of credit) on the property. Tenants of borrowers in this circumstance may also be eligible for leases under the program. Borrowers or tenants interested in a lease must qualify and be able to document that the new market rental rate is no more than 31% of their gross income.

Leases under the new program may be up to 12 months, with the possibility of term renewal or month-to-month extensions after that period. A Deed for lease property that is sold includes an assignment of the lease to the buyer.

You can download full details and instructions here. Fannie_Deed_For_Lease.pdf