Academic journal article ABA Banking Journal

Tackling the "End of the Beginning" of the Nation's Mortgage Crisis

Academic journal article ABA Banking Journal

Tackling the "End of the Beginning" of the Nation's Mortgage Crisis

Article excerpt

"This is not the end. It is not even the beginning of the end. But it is, perhaps, the end of the beginning." SIR WINSTON CHURCHILL, Nov. 10, 1942, FOLLOWING THE ALLIED VICTORY AT EL ALAMEIN, IN NORTH AFRICA

The sheer growing size of the mortgage market challenge boggles the mind. Taking on the loan modification portion of the Obama Administration's Homeowner Affordability and Stability Plan (HASP) is by itself no mean task. When moving beyond a loan here, a loan there, "loan modification is almost like launching a whole new business," says Michael Brauneis, a director in the regulatory practice at Protiviti.


Indeed, even for those mortgage servicers that have been involved in major efforts to modify mortgages pre-Obama plan, the staffing challenge alone has been impressive. Some have reversed engines, recruiting where they were recently laying off.

"We've been hiring hundreds of people a month, because of the huge volumes" of loans to be modified, said Tom Kelly, a spokesman for Chase, one of the nation's largest mortgage servicers. Chase has been receiving an average of 40,000 calls a week inquiring about either the refinance option or the modification option of the Obama program, and downloads of program information from Chase's mortgage website eclipse the phone calls.

Wells Fargo, formerly the nation's largest servicer, is reviewing more than 200,000 customers already in its loss mitigation queue for possible help under the modification part of the federal plan.

Bank of America Home Loans, reflecting its takeover of Countrywide, is the nation's largest mortgage servicer, and has added nearly 2,000 employees nationwide solely for handling aspects of loan modifications. And having a pulse doesn't top the list of qualifications for obtaining these jobs. While the borrowers involved are already in the fold, Terry Moore, managing director, North American Banking, at Accenture, says the skill set required most closely resembles that of loan originators.

"It takes some relationship skills to act with these borrowers," says Moore.

Even so, with all the new hands, BofA is sending out its outreach letters over time, not in a single wave. "It's a constant stream of mailings," explains spokesperson Jumana Bauwens. "We don't want to drop all the letters at once. Otherwise, we couldn't handle the response."

A challenge for all shops

Not only large servicers have been involved in the efforts to refinance or modify troubled or potentially troubled borrowers out of their difficulties. In late April, G. Gary Berner, executive vice-president of $9.6 billion-assets First Niagara Bank, Lockport, N.Y., testified for ABA before the House Financial Services Committee:

"[Traditional banks] are already a major part of the solution. At First Niagara Bank over the last six months, we have done 27 repayment plans or modifications and have had only three redefaults. I have just returned from chairing ABA's industry meetings on housing and mortgage finance, and almost all banks there reported having similar success with workouts and modifications."

These smaller shops are having to address operational and staffing challenges, as well. For example, $430 million-assets First Federal Savings Bank of Twin Falls, Idaho, has had to add an employee to mortgage operations to accommodate the labor involved in the new federal program, according to Brenda Holmes, senior vice-president-real estate loans administration. Borrowers have been especially keyed in on refinance opportunities, Holmes says, and just handling the volume of questions has added to the workload.

Spreading need for aid

Few economic matters in recent history have required so much of the attention and effort of government's legislative and executive branches, the private sector, and the trade association contingent, as the mortgage crisis. …

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