The slow implementation of the Home Affordable Modification Program (HAMP) since its initiation in March has been a great frustration to the Obama administration. The number of foreclosures is rising at a record pace due to the slow implementation of the new loan modifications under HAMP guidelines and are estimated to hit 2.4 million by the year's end with foreclosure estimates for the year being raised to 3.5 million. Due to increased activity in the second quarter foreclosures are expected to exceed 300,000 for each month of the coming quarter. Sadly, these numbers from the Center for Responsible Lending look very optimistic as it translates to a mere $7,200 in loss per value per home, a far cry from the half a trillion dollars in property value actually in homes across the country.
The government is trusting in new laws and diligence from mortgage servicers to stem the tide of foreclosures, though with companies such as Saxon things look worrisome. Saxon Mortgage Services, a division of Morgan Stanley, with a scant 6% of mortgage alterations between 2005 and 2007 and is rated the lowest rank by an April Credit Suisse Group analysis of the home loan modification performance by mortgage servicers. This is a less than a quarter of the 28% modification rate the best rated group, 1st Foreclosure Prevention, a Goldman Sachs Group Inc, held through the same time period.
Saxon was caught unprepared for the tide of letters, phone calls and requests for paperwork that started immediately after HAMP was announced causing their entire system to collapse under the weight. An internal audit in May said that Saxon's scanning equipment became overloaded with documents sent in by homeowners seeking home loan modifications leading to massive delays and hundreds of lost applications and documents. It was just not ready for the rush of new applicants as previously the company had simply processed payments, maintained impound accounts, and collected delinquent payments from customers.
Part of Saxon's problems also stem from when Morgan Stanley purchased the company in 2006 and decided to more than double the number loans Saxon serviced instead of stabilizing old accounts first. When other companies began gearing toward loan modifications early on, Saxon was still too busy growing its accounts and it was not until first half of 2007 when Saxon finally started contemplating loan modifications. By that time the number of loan accounts Saxon had were staggering and they were simply unprepared for the volume of requests that would later come from their own accounts.
It took ten weeks after the initial systems crash for an internal audit to tell everyone what had gone wrong, and by then the problems were huge with too many accounts for their small staff and insufficient system to handle. Thankfully, Saxon has since hired outside help from other companies to try to fix these problems. With the new system, thousands of highly trained trainees with knowledge of the art of negotiating and executing loan modifications in a wide variety of situations are required by loan servicers. The problem is that the sheer numbers of mortgages owned by different investors have many different parameters for judging the merits of each modification leading new trainees basically getting a new lesson with every mail entering their inbox due to a lack of structured procedure templates.
High ranking representatives from Saxon and other servicers will be meeting with Treasury Secretary Tim Geithner and Shaun Donovan, Secretary of HUD in July to publicize each servicer’s results to encourage the servicers to adapt to the HAMP program. This will be of little comfort to Saxon's clients who don't need to be that they need to resubmit all their paperwork for the fourth time.
1st Foreclosure Prevention is one of the top-rated companies for home loan modifications, mortgage adjustments and other services designed to make life easier for home owners and business owners alike. If you find yourself in need of help with making your lease or mortgage payments, call 1st foreclosure prevention today for a free and helpful consultation.
Visit us at: http://www.1stforeclosureprevention.com
