Modernizing Consumer Foreclosure Relief Programs

BLOG VIEW: During the height of the Great Recession, with residential mortgage default frequency and severity at historical highs, an avalanche of consumer relief programs were created at the federal, state and even local levels.

Programs such as HAMP, HARP, Hardest Hit Funds and the National Mortgage Settlement were some of the more prominent promulgations. Many states also had existing and/or new initiatives to stem the foreclosure tide, like HEMAP in Pennsylvania, the MAP in New York and the Washington State Foreclosure Fairness program.

In fact, one of the most pervasive strategies put forth by nearly 30 states was to impose mandatory foreclosure mediation, which still exists (but not at the case volume during the crisis).

Now, with the foreclosure nightmare in the rear-view mirror and the housing market humming, there is a movement to take advantage of the “down time;” take a healthy dose of “lessons learned” and retool processes, policy and technology.

Collaborative web portals

A popular enabling technology concept that served the industry well during the crisis – and one that was a requirement for servicers in the National Mortgage Settlement – is the multi-stakeholder, web-based portal. This model has proved to be an excellent device for document exchange, communication, application processing, tracking, scheduling and monitoring the progress of mediation and the pursuit of foreclosure alternatives, including financial assistance.

Traditionally, both the administration of consumer assistance and state foreclosure mediation have been decentralized processes relying on emails, faxes and snail mail to exchange documents and information. Under the current model, responsiveness, accessibility to data, transaction-status awareness, consistency of treatment and continuity of communications are at best uneven and at worst fatal to a successful result.

Moreover, since these activities involve multiple parties, a neutral, centralized technology platform with standardized communication methodologies and information/document exchange dramatically improves key aspects of these transactions. It also provides an excellent consumer experience while minimizing operational, compliance and reputational risk for lenders.

The benefits

At the outset, the centralized communication portal model lends itself to the highest degree of transactional transparency by authorized stakeholders with access to relevant information. Any authorized party has a real-time view – the extent to which may be limited by business rules – of case status, required documents, submitted documents, progress toward completion, notice of disposition, additional information requests and expiration of document validity, to name a few.

A typical example of a weakness in the current decentralized process is that a consumer’s attorney cannot see documents that his client submitted unless he received a copy from the consumer. Under the portal concept, the consumers’ attorney need only sign onto the portal to see the submitted document along with all other relevant information to which the attorney has been granted access.

Ensuring transparency and standardization

Two overarching attributes of a centralized communication portal are transactional transparency and process standardization.

Since all stakeholders have real-time access, the ultimate transparency exists. As mentioned before, the access may be restricted by business rules, but this type of view into the case will not only increase efficiency and reduce cycle times, but it will also minimize (if not eliminate) communication problems that ultimately lead to escalation, consumer dissatisfaction and possibly regulatory non-compliance.

Also, a single and comprehensive audit trail is viewable for all parties so that common disputes regarding document submission, required actions and compliance with deadlines may be easily assessed and validated.

While each program and jurisdiction will certainly have different eligibility requirements, documents, milestones and cycle times, the 80/20 rule applies across the board, and the structure and architecture of the portal’s workflow will allow for configurability to address these differences.

Most importantly, for the participants in a given jurisdiction and specific program, there will be a large degree of standardization, which promotes transparency, systemic fairness and a high level of efficiency.

Standardization will also produce more statistically valid data to determine the efficacy of the program and the process.

Some of the well-intentioned relief programs of the past failed because of the inability to measure results based on the variability of processes execution.

In addition, program changes may be made at one time and in one place, thus ensuring rapid deployment and compliance by all users.

Additional benefits include the following:

  • Real-time tracking of the progress of a case;
  • Secure communications;
  • Audit trail at a neutral site;
  • Information security;
  • Stakeholder accountability;
  • Problem resolution before escalation;
  • Implementation of policy quickly to affected markets and population; and
  • Easy adaptation for mobile devices.

The Web-based neutral and required communication portal may be the most effective way for government entities to quickly, efficiently and fairly implement policy to aid consumers in financial crises, particularly those related to homeownership.

With a stable real estate market and technology like this becoming more economical, mature and readily available, now is the time to strongly consider upgrading and modernizing the paradigm before the next tsunami hits.

Camillo Melchiorre is president of IndiSoft, which offers a suite of technology solutions for mortgage companies, including compliance, vendor management and valuation.

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