This week, the Orb chats with Keith McMaster, president of Excel Innovations. His company focuses on service of process, skip tracing and other functions related to default servicing and foreclosure – and there has certainly been no dearth of activity in these areas recently.
Q: Higher levels of default and foreclosure have resulted in a greater need for swift borrower contact, and a corresponding greater need for operatives in the field. Can you describe strategies and tools that might be most helpful in this area?
McMaster: Aside from making phone calls and sending letters, there is an additional option that can achieve desired results. Process servers are usually first to have direct, face-to-face contact with borrowers. The more progressive process servers use PDAs and laptops in the field, which help report real-time results. It would be advantageous to have this information transfer to servicers directly after serving borrowers.
Also, process servers' cell phones could be equipped with servicers' phone numbers, so borrowers could contact loss mitigation departments directly upon receiving a summons. Other options could include asking borrowers if they are willing to provide contact information, such as all phone numbers or places of employment.Â
Q: Again, as default volumes have risen, I imagine a number of jurisdictions and states that previously had very low default rates are now more troublesome. Can you identify such localities and describe some of the intricacies local rules bring to the service-of process function?
McMaster: Initially, I believe most jurisdictions in the Midwest had lower default rates than those exhibited in states such as California, Nevada or Florida. It appears it took a little longer for the foreclosure crisis to reach the Midwest – but once it did, most major cities were hit pretty hard. The crisis in Chicago recently reached a peak, whereas it has been an ongoing dilemma on both coasts.
As for intricacies, some judges have invoked their own rules related to service of process on foreclosure cases. State or local rules may claim it is acceptable to substitute-serve an individual who resides at an address for the defendant, but a judge may order it to be re-served with personal service upon the individual only. Another example would be the number of attempts that require due and diligent service. It may vary from jurisdiction to jurisdiction, and sometimes among judges in the same jurisdiction.Â
Q: Have you observed any trends in the attitudes of delinquent borrowers you locate these days? After all, just about every subprime borrower can go on the defensive and blame brokers, lenders, investors, etc.
McMaster: It's never easy to serve a defendant. What makes foreclosure services more difficult is that the home is the one thing a borrower tries to salvage. Many times, a borrower is already delinquent on credit cards, utilities, car loans, etc., and then we show up to inform them that their house also is delinquent.
Our philosophy is to treat the defendant with respect and understanding. Our servers never know if this is a borrower's ‘last straw,’ so they attempt to help in any way possible. Our servers have reported that the emotions of persons being served can range from devastation, to anger at the broker, or anger with us for bringing the summons.
What's starting to happen more frequently – and this may be a direct result of the trend in loss mitigation – is that many borrowers are already working out deals with their lenders, so they do not understand our delivery of a foreclosure summons.
Q: In your experience, just how overwhelmed are the courts?
McMaster: The courts are definitely backed up. In some courthouses, it can take up to 14 days or more to file a summons and complaint. Files are brought in by the box-load, and the courts are not prepared for this volume. Some courts work on case management systems that are more than 20 years old. Also, because court clerks are bombarded with paperwork, they can lose their momentum to file anything quickly.
With this lack of manpower and technology, the courts are quite fractured. However, we have observed that some courts can handle large volumes because they've implemented current case management systems and electronic filing systems – they are the ones that seem to best manage the workload.
Q: Are you finding that the number of borrowers who simply walk away from their homes has risen substantially, as some national media outlets have reported or suggested? If they're bolting in higher numbers, what observations can you make related to abandoned collateral?
McMaster: I know the overall number of vacant or abandoned buildings has increased. However, I'm not sure if the percentage has risen or just the number, due to the volume increase of foreclosures. Our process servers do not enter any of these homes. Instead, they rely on different methods: looking through windows, checking utility meters to see if they are running or noticing excessive amounts of mail piling up at the door.
Regarding abandoned collateral, I have heard – from industry sources – that many outdoor air conditioning units have been stolen in an attempt to retrieve the copper coil.