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2007-08-24 13:20:00

Loss Mitigators Challenge Subprime Lenders to Cooperate

Amid the current subprime mortgage meltdown, experts are here to help the myriad of borrowers being foreclosed upon. Companies, such as I Short Sale, Inc., continue to work with lenders to find a better solution for all parties.

Subprime lenders of all sizes have been cited by loss mitigation experts for their irresponsiveness in handling delinquent mortgage loans. Specialists go onto report that in some cases, they spend close to two hours over the phone just to pinpoint the right representative to speak with in the company. "Trying to find a responsive individual with actual decision making authority in the banks has become increasingly difficult since the subprime debacle," says David Cavarra, a Loss Mitigation Specialist for I Short Sale, Inc. in Woodland Hills, CA. "Banks must act quickly to improve efficiencies; there needs to be set procedures within a single department handling the loss mitigation of delinquent borrowers. Whether some banks purposely try to avoid communicating with specialists or not, this lack of concern and overall ineffectiveness is something that will eventually catch up with them."

As the real estate market continues to spiral downward, sending property values into depreciation, hundreds of thousands of borrowers are left with few options and little help from lenders. "One of the main reasons why some of these banks are so irresponsive is simply because they refuse to admit any losses right now. For lenders, loss mitigation solutions translate into underperformance; a tough pill to swallow," asserts Cavarra.

Although the end of the turmoil in subprime lending does not appear to be in sight, many lenders still do not have the right infrastructure and capabilities to handle the influx of delinquent borrowers. Wells Fargo Bank and American Servicing Company, for example, have been cited as notorious by some loss mitigation specialists for being the least receptive and having the most "lost faxes and paperwork." Representatives are trained to be "gatekeepers" and seek solely the bottom line rather than looking out for the best interests of their clients … the borrowers.

Adding to this difficulty, many lenders that are reached rely on property appraisals as dated as six months old. "Unfortunately, in many parts of the country, a six-month period in the market today just does not hold up. Not taking the time to reevaluate prices results in more and more properties going into foreclosure. This defeats the purpose of loss mitigation," explains Scott Sawyer, Executive Vice President of Vendor Relations for I Short Sale, Inc.

Sawyer, a long time loss mitigation expert, states that, "Lenders tend to forget that engaging in some sort of loss mitigation procedure now, results in saving time, effort, and money in the long run. Although solutions may involve a present loss in collections, avoiding the addition of a foreclosed property to an already expanding REO portfolio is a strategic move on a lender's behalf; especially in a declining market."

I Short Sale explains that some banks, on the other hand, have slowly adapted to today's declining real estate market by establishing infrastructure and making other necessary changes to handle loss mitigation. "Accommodations and concessions have been made by lenders in order to avoid taking properties back. Even the U.S. Dept. of Housing and Urban Development (HUD) and the Federal Housing Administration (FHA) have become responsive and involved by offering financial incentives to lenders who will be more flexible and open to loss mitigation techniques," says Sawyer. "We help by educating lenders. Those who prove themselves to be the most flexible and adaptable will be the ones who will come out on top in the long run; even if it means taking on smaller losses today to avoid larger ones in the future."

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