Ocwen Financial Corporation, which does residential and commercial loan servicing, special servicing and asset management, is reporting significantly better results in its HAMP modifications than the rest of the industry. And they attribute it to superior technology.
In congressional testimony, Ocwen’s President Ronald Faris claimed:
- that Ocwen is converting trial modifications to permanent modifications at a rate that is 10 to 20 times greater than industry average;
- a 3-month re-default rate of less than 5% for Ocwen, versus 18.7% to 33.7% for the industry; and
- a total of 100,000 successful modifications since the beginning of the mortgage crisis.
These impressive numbers could use a little clarification. So could the statement that Ocwen has spent “$100 million in R&D to build loans servicing technology that incorporates behavioral science for effective customer communication and is also scalable for high volumes.” But Ocwen is an industry leader and when they report these kinds of results, it’s worth listening.
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Likewise, their recommendations for improving the HAMP program carry weight. Among those:
- Lower the borrower debt-to-income (DTI) ratio for modifications to below 31%; in other words, allow for lower monthly payments on modifications
- Allow for principal reductions on modified loans
- Make additional funding available for housing counseling groups
- Require underperforming servicers in HAMP to outsource to servicers that perform
Also worthy of note: Mr. Faris is one of the few industry voices who believes that HAMP is a “well designed response to the mortgage crisis”. Maybe he’s on to something.