Magazine article Mortgage Banking

Building a Firewall

Magazine article Mortgage Banking

Building a Firewall

Article excerpt

The servicing business has been transformed in the last year or so. For much of the housing boom, the servicing business was a fairly routine back-office enterprise. Today, it has become the front lines for reaching borrowers at risk of foreclosure.

Servicers are employing all kinds of communications tools to reach these borrowers, in some cases even prior to delinquency if it looks like they might encounter difficulties. But the first challenge is isolating those who might be facing difficulties and then taking real steps to contain the damage to homeowners, servicers and investors. It's akin to building a firewall to limit the broader economic damage from the housing downturn, while keeping people in their homes.

But what would help ground the national dialogue about foreclosures more in reality is to put the scale of the delinquency and foreclosure problem in perspective. While headlines have been screaming about new records for foreclosure starts, some important facts are getting lost amidst the noise. An article by Mary McGarity this month titled "The Big Picture" provides some of that missing perspective. She quotes Doug Duncan, chief economist for the Mortgage Bankers Association (MBA), saying, "[Thirty-five] percent of people who own a home don't have a mortgage. When that's taken into account, basically there are 5 percent of homeowners who are behind on their payments. That's the big picture." Duncan adds that under a worst-case scenario, roughly half of that 5 percent, or 2.5 percent of all homeowners, would end up losing their homes. "From a purely broad-based economic perspective, 2. …

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