A couple of studies released yesterday confirm what anyone involved in collecting past due mortgage loans already knew.
It's a hard job and it's not getting any easier.
CoreLogic reported that 90-day plus delinquency rose in February to 7.3%, an increase of 10 basis points over January. One would have hoped that with tax refunds starting to show up by the end of the month, at least some of that money might have gone toward the mortgage.
But that would have required the reversal of another trend, the tendency of borrowers to pay their credit cards and auto loans ahead of their mortgage. TransUnion reports that the inversion of traditional payment priorities that began in 2008 stubbornly persists in 2012:
"Though the percentage of consumers delinquent on mortgages and current on credit cards has dropped in the last year, the payment hierarchy shift is as strong as it was one year ago, with consumers opting to pay their credit cards before their mortgage payments," said the study's co-author Matt Komos. "We established in our earlier study that this payment hierarchy reversal was chiefly the result of two factors: the decline in house prices and high and persistent unemployment levels."
Since neither housing prices or employment appears likely to improve significantly in the next year, mortgage servicers are challenged to keep their portfolios from deteriorating further through more effective collections strategies.
The GSE's think one way to do this is by accelerating the start and increasing the pace of collections treatment. Their Servicing Alignment Initiative (SAI) requires servicers to begin their attempts to contact past due borrowers on the third day of delinquency and continue every third day with multiple attempts throughout the day until they achieve a quality right party contact (QRPC). While there is allowance for delaying the effort for borrowers scored as low risk, this is a more aggressive treatment timeline than was common prior to the recession and bursting of the housing bubble.
So how do you get this extra work done with flat or decreased budgets for collections, driven in part by the need to also fund major increases in loss mitigation staff to support single point of contact (SPOC) and other foreclosure prevention mandates? One cost-effective way is to shift the burden of outreach off of collections staff and onto hosted borrower interaction systems that use interactive voice messages, email and SMS text to initiate dialogs with borrowers.
If you'd like to learn more about this approach, post a comment below. Or if you'll be attending National Mortgage News Mortgage Servicing Conference in Dallas April 17-19, come to Varolii's Industry Innovation luncheon and we'll show you how we help five of the top 15 servicers get out of neutral and into high gear.
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