Subprime servicer Ocwen Financial Corp. says its success in converting trial loan modifications to permanent status under the Home Affordable Modification Program (HAMP) is due, at least partly, to its practice of requiring verified documentation from borrowers before putting them in trial modifications.
Ocwen, along with HomEq Servicing, a unit of Barclays, converted the highest percentage of trial loan modifications through April, according to a report from the U.S. Treasury Department released this week. Each shop converted about 83% of its trial modifications.
The Treasury is now requiring all HAMP servicers, as of June 1, to require up-front documentation prior to initiating new trial modifications.
‘We have a more front-end-loaded process,’ Paul Koches, Ocwen Loan Servicing's executive vice president, told Servicing Management late last year. ‘It takes more work to get to the trial mod, but once we get the homeowner there, the sustainability, in terms of pull-through rates and redefaults, is favorable.
Ronald M. Faris, Ocwen's president, says the company's modification success also stems from its 30 years' experience servicing high-risk loans, as well as the firm's proprietary technology. Ocwen has invested over $100 million in research and development to build loan servicing technology that is scalable for high volumes.
The firm also cites its reliance on consumer behavioral science research and long-standing partnerships with grassroots consumer advocacy groups as instrumental in enhancing borrower outreach and effective communications.
In testimony before Congress in March, Faris voiced Ocwen's support for HAMP and recommended several program enhancements, including allowing for principal reductions on modified loans (approximately 15% of Ocwen modifications, including non-HAMP mods, involve principal reductions), making additional funding available for housing counseling groups and requiring underperforming HAMP servicers to outsource to servicers with better performance metrics.
"Our message to homeowners facing difficulty paying their mortgages is to work with their servicer,’ Faris says. ‘Modifications represent a very promising solution. They also require proactive communications with the servicer and a real investment of time. But it's worth it. We urge patience and persistence.’