Poor Communication Paints Loan Modification Process

“You’re going to need a bigger boat.”

It's perhaps the best line from the best movie in the past 50 years – Sheriff Brody (Roy Scheider) to Captain Quint (Robert Shaw) in Jaws, after Brody has a close encounter with the title character, and correctly foresees that the little fishing trawler they are setting out in is not up to the task at hand.

If only those that police the mortgage servicing industry had the same sort of vision when they set up the Home Affordable Modification Program (HAMP). Expected to be a lifeline to the millions of borrowers facing imminent default on their mortgages, instead relatively few have actually been helped through loan modifications.

A recent article in the Wall Street Journal highlights some of the issues limiting its success, one of which caught my attention:

"Applicants were most often rejected because they didn't submit the necessary paperwork, or it was lost by their mortgage company. Nearly 266,000 applicants were denied for this reason."

Seems like the mortgage industry was about as ready to tackle their great white of a problem as was the town of Amity. In other words, the mortgage servicers need "a bigger boat".

Then as if to spill blood in the water, on March 3rd, the 50 state AG's (along with the yet to be fully formed CFPB and the Justice Department) issued a confidential 27 page term sheet to the five largest mortgage servicers in connection with their foreclosure practices. These came under increased scrutiny last fall in what is known as the "robo-signing" scandal. The contents of this term sheet have now been published and it contains three interesting provisions vis a vis Varolii and interactive communications.

The first requires the servicers to promote their loss mitigation options to distressed borrowers, and in doing so they may use auto-dialed messages, but it will only “count” if they ultimately result in a contact with a loss mitigation specialist:

Another provision requires the servicer to name a single point of contact (SPOC) for each borrower in the loss mitigation process:

Finally, the servicers are required to notify the borrowers regarding any additional documents required to evaluate their eligibility for a loan modification:

While the servicers have not yet agreed to these terms, there is a strong likelihood that something similar to these will emerge as new servicing guidelines for the entire industry, not just the big five.

Put these three requirements together, and it lines up very well with Varolii's capabilities:

1. No other interactive communications provider is better equipped to manage the process of transfers into the servicer's call center from an interactive message; our call queue management feature set is second to none.
2. We can leverage our Sea of Names to clearly announce the name of the assigned Loss Mitigation counselor in subsequent communications. We can also facilitate a return call from the counselor to the borrower through our Agent Connect feature if a call transfer takes too long.
3. Since there is no prohibition on using recorded messages for notifying borrowers of additional documentation requirements, we represent a less costly and timelier channel for these communications than manned dialing or postal mail.

Closing Thoughts

As much of a burden as these and all the other procedures outlined in the term sheet will be on the servicers, I think they will breathe a collective sigh of relief when the risk of the unknown becomes the law of the land and they can once again focus on being the best loan servicer they can be.

Varolii can help with that – our mortgage solutions can directly address the problem borrowers have with the timely completion of the loan modification application (e.g. through status messages that remind the borrower of documents they still need to provide). We also free up human resources by automating tasks like welcome calls or early stage collections so they can directly assist borrowers in the modification process. In all cases, servicers that use Varolii are in a much better position to avoid becoming “chum”.

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