Given the economic impact of the pandemic, mortgage defaults have been a stark reality. In this situation, loan modification is one option that can be beneficial to mortgage servicers as well as borrowers since foreclosure is never a preferred solution to either parties.
For borrowers, a foreclosure will result in the loss of their home and will lead to a number of expenses in the form of foreclosure fees, additional legal fees, and possibly a deficiency judgment if their outstanding liens exceed the current value of their home. For servicers, foreclosure is a cumbersome solution that can lead to vacant and abandoned property that will likely deteriorate considering there’s no one to take care of it, and its value will diminish.
Instead, a loan modification can be a win-win situation for both borrowers and servicers, as people get to keep their houses, and lenders/servicers get their monthly payments.
However, accounting for loan modifications has been a challenge for financial institutions for a long. The volume of work involved in successfully completing modifications, shortage of resources, and lack of standardized business processes are tough to manage for most servicers.
This brings us to the question, are servicers equipped to handle the frequent rise in volumes? Jim Cameron, the senior partner with STRATMOR Group, states that Recruiters are in an all-out “firefight”. Firms are offering signing bonuses to steal underwriters and processors from competitors or giving retention payments to keep them from leaving. But why go through so much when outsourcing can suffice? We have previously written about the 8 Benefits of Hiring a Mortgage Loan Processing Company. Loan Modification Process Outsourcing has many benefits and saving time and Money for Servicers are the ones to be highlighted.
Loan modifications are common for secured mortgages and are usually done to reduce or relieve the borrower from financial pressure by decreasing the monthly payments, pausing/stopping the collection activity. It essentially gives the option to manage finances as the situation allows and avoid foreclosure. Modifications often include:
- Reducing the interest rate
- Changing variable interest rate to a fixed one
- And Extending the mortgage term length
Borrowers are offered a three-month period “trial modification,” to see whether the modified plan works for them, and only on completion of the trial, the “permanent modification” is done. The Loan Modification Process is iterative. It ideally covers all documentation for a fresh loan, in addition to tracking the mortgage history. The demand forces lenders to run the processes faster and provide the borrowers with the best options. The chances of borrowers backing out however continue to be an appalling factor. This is where Loan Modification Process Outsourcing comes in as the apt solution.
The biggest expense for lenders that run loan modifications on their own is directed towards hiring and training a skilled team, paying industry standard salaries and benefits, and acquiring the equipment/technology required for setting up automated processes. The issues related to workforce scaling too cannot be overlooked. The plus side of Loan Modification Process Outsourcing is that the loan processing outsourcing providers already have a strong, experienced team and processes integrated with the latest technology platforms. Servicers that outsource all or part of the loan modification process delegate the tasks to a committed team which saves them time. Outsourcing helps in handling the increasing volumes effectively.
Even with the huge influx of documentation, the service providers can provide lenders/servicers a streamlined process that runs seamlessly to deliver the results on time. This in turn allows Mortgage Servicers to focus on their core priority tasks. Loan Modification Process Outsourcing allows servicers to partner with experienced professional teams that ensure highly accurate and efficient loan modification that allows them to meet the targets and reduce the overall turnaround time.
Loan modification requires a lot of documents including proof of employment, Federal tax returns, bank statements or balance sheets, and added inputs to clarify the borrower’s creditworthiness. This process requires an open communication network to make up for the missing documents promptly and technology for efficient, faster, and error-free document processing. For faster processes, service providers have established protocols to boost communication and improve customer relations. Most mortgage loan modification outsourcing service providers offer competitive pricing for the services offered, making it a cost-effective solution when compared with in-house infrastructure and staffing costs.
Loan Modification Process Outsourcing doesn’t just save the servicer’s time but also allows them to gain all-inclusive support in the origination process and loan funding. It also improves stability and security in a cost-effective and streamlined manner.
Loan Modification Process Outsourcing saves servicers Time and Money by:
- Providing a dedicated team of mortgage experts who specialize in loan modification.
- Offering Due diligence and verification processes that help in making insightful decisions while approving loan modification for a borrower.
- Leveraging technology for faster processing and quicker approval times
- Establishing effective communication channels to interact with borrowers.
PrivoCorp has well-developed process-based protocols to help servicers reap the benefits of the mortgage loan modification process. Our tried and tested standardized procedures enable servicers to work with high volumes of loan modification requests. Get in touch with us today!