At a time when interest rates are seeing a major spike, there is a continued rise in defaults. A slowdown in the economy looks inevitable and servicers have to find ways and means to retain borrowers.
One way is by offering loan modification option as a response to a borrower’s inability to repay a mortgage or home loan. In the recent past, loan modifications are steadily on the rise as many homeowners are waking up to the very real possibility of a foreclosure. More servicers are also allowing borrowers to modify loans because default and foreclosure are costlier to their business.
However, the process of offering loan modifications comes with its own set of challenges for servicers.
Challenges in the Loan Modification Landscape
Many homeowners experience significant delays while servicers decide whether to grant a loan modification or not. Sometimes, servicers fail to tell homeowners about missing documents or other times, they take time to review requests promptly.
In some cases, servicers do not look at the documents submitted by homeowners on time which could lead to expiry of the paperwork. Sometimes, the documents may get lost. In these situations, they ask homeowners to resubmit the information they have already submitted once.
At times, calculation errors also cause issues where servicers may use erroneous income information in processing the Net Present Value (NPV) or there could be some other calculation errors. Under federal law, if a loan modification is denied because of an NPV calculation, the servicer must include the details used in the NPV calculation in the denial notice.
Another issue could be the failure on part of servicer to convert a trial modification into a permanent modification. Often loan modifications start with a three-month trial period plan. But sometimes, homeowners despite having made their trial payments can’t get the servicer to make the modification permanent.
Servicers not reviewing an application or failing to honour a modification agreement after a servicing transfer may be another issue. In the mortgage industry, servicing transfers are a common practice. However, it is possible that sometimes, the new servicer fails to review an already submitted loss mitigation application or fails to honor a modification agreement with the previous servicer.
How Servicers Can Overcome Challenges & Streamline Loan Modification Process
Servicers can often get overwhelmed while working on the loan modification process as they are required to follow up on different documents from multiple sources. They need to interact with the home owners, loan officers, underwriters and so on to fulfill conditions on a loan modification.
It helps to outsource to third party service providers who can manage the operational challenges of loan modification through more efficient, coordinated and streamlined efforts. Mortgage service providers have dedicated teams that can take care of all the processing work leaving servicers’ teams enough time to focus on their core tasks.
Maintain Transparency and Robust Communication across Business
The loan modification process involves a huge influx of documents including proof of employment, Federal tax returns, bank statements or balance sheets, and added inputs to clarify the borrower’s creditworthiness. It is necessary that servicers maintain transparency through an open communication network to make up for any missing documents promptly.
This is where outsource partners step in by offering technology that is efficient, faster, and can help with error-free document processing. Along with saving servicer’s time, loan modification process outsourcing also allows servicers to maintain transparency, stability and security in the documents process in a cost-effective and streamlined manner.
Determine Completion of Application
One of the most important steps is to have a proper review of the application and then determine whether it’s complete or not. A mortgage loan modification application will require the details of a borrower’s financial information, the mortgage information, and the specifics of the hardship situation. Outsourcing the process can offer support to servicer in the form of expert help to review this application and take the right decision on it.
Notify the Borrower
The loan modification process requires servicers to notify the borrower within five days stating that the application is complete or incomplete. In case it is incomplete, the servicer must describe the information needed to complete the application.
Outsource partners take up the responsibility of keeping open communication channels with borrowers. They ensure that borrowers are in the loop regarding all communication that has to go to them from the servicer’s team with regards to the application.
How PrivoCorp can Provide Support in the Loan Modification Process
PrivoCorp offers a suite of services that can help improve turn time while improving loan modification process flow at competitive rates.
The company helps servicers in establishing streamlined workflows to efficiently meet the rising volume of loan modification demands through standardized processes and project-suited resources. The expert team of loan modification professionals and advanced technology-based tools help servicers in delivering an improved experience to borrowers.
PrivoCorp helps servicers deploy and execute strategically planned loan modification processes by enabling them with efficient services aimed at efficiently discharging end-to-end loan modification requests.
If you are looking for support to streamline your default and loss mitigation operations by engaging effectively with borrowers, PrivoCorp can offer you the right solutions.