Home BASE program fills gap in loss mitigation efforts via proven outreach, counseling and coaching capabilities
The mortgage meltdown that was part and parcel of the Great Recession has proven to be a watershed event in the ever-connected lending, mortgage servicing and housing counseling industries. In a myriad of ways, nearly all industry players were forced to radically change many practices that had become ingrained in their operating structures during the “boom” years preceding the meltdown. The mortgage servicing industry, in particular, found itself in the crosshairs of an angry public, outraged politicians and shortchanged investors – all looking for answers on how things could have gone so wrong.
The net result was a bevy of new programs, ranging from Hardest Hit Funds to help struggling borrowers through mortgage payment assistance, to the Making Home Affordable Program (MHA) that provided mortgage servicers, investors and borrowers with a variety of tools and processes to modify mortgages and help borrowers fight off foreclosure and stay in their homes.
A key result of these programs, and corresponding regulation and rule-making, was that loss mitigation teams became a much bigger part of many loan servicers’ organizational structures. Easing the way for this ramp-up in activity were fees paid to loan servicers and investors in connection with successful efforts to utilize the toolkit provided by MHA.
While some aspects of the recovery efforts put into place since 2008 have begun to fade away, including funds extended to loan servicers to help defray the cost of providing relief to borrowers, some important legacies have become ingrained into the operations of nearly every loan servicer. Perhaps most important is the standardization and adoption of many best practices that were learned during the crisis.
But, as the mortgage industry has recovered and some key programs have either reached or are approaching their sunset, many lenders and servicers are scaling back their loss mitigation efforts (and related staffing) and returning to business models that more closely tied to their core mission loan origination and servicing.
With the Great Recession and the real estate crisis now in our rear-view mirror, it begs the question – what role should loss mitigation play within the mix of activities carried out by loan servicers? Clearly it is not a front-line role in the way it was during the recent recovery. But just how far can a servicer scale back loss mitigation and still be in a position to effectively deal with a future bump in the road? How about an unexpected crisis in the form of a major weather event such as a devastating hurricane or flood, where millions of homeowners would also be affected by a disruption to their jobs and businesses?
The challenge is how to continue to provide vital loss mitigation services to troubled borrowers without diminishing already slim margins. We believe the answer lies in creating partnerships with third-party HUD-certified housing counseling services who can step in to play the role of borrower advocate.
Consolidated Credit Solutions has created Home BASE (Home Borrower Advocacy Services and Education) because we recognize the ongoing need for effective loss mitigation services. Over the past decade, Consolidated Credit’s housing team has helped thousands of borrowers rehabilitate their loans. We helped craft and implement various Hardest Hit Fund programs in Florida.
In addition, the loan servicers that worked with us during the recovery have consistently been to top-performing servicers participating in the U.S. Department of the Treasury’s “SD 13-08” Post-Modification Counseling Program. In fact, Consolidated Credit was able to make ‘right-party-contact’ with an average of 56% of the borrowers listed on the inclusion files received from its servicing clients. Even more notable is the achievement of a counseling take-up rate of 37% compared to an industry average of only 7% as reported by Treasury.
Moving forward, we’ve used these experiences to develop the Home BASE program. Our mission is to help borrowers overcome obstacles to retain their homes or to find a mutually agreeable exit strategy.
Home BASE allows loan servicers to directly aid to distressed borrowers without taking any focus off their core business. It can increase the health of a servicer’s loan portfolio by rehabilitating troubled loans without significantly affecting a loan servicer’s budget or organizational structure. Counselors can sit on the same side of the desk as the borrower, helping them to make applications correctly and easily.
Although the U.S. housing market is certainly out of the 2008 crisis, natural disasters like hurricanes Harvey and Irma are a reminder that there is still work to be done. Millions of homeowners are now left to pick up the pieces, many with little financial safety net in place. Working in partnership with servicers and lenders, Home BASE gives these borrowers – and any borrower who experiences financial hardship – a safe place to land and regain their ability to manage their mortgage effectively.
Loan servicers who would like to learn more about Home BASE can email Maria Gaitan, Director of Housing Counseling at MGaitan@consolidatedcredit.org.