National Mortgage Servicing Standards: A Path to Resolving Foreclosure Crisis

The hearing on national mortgage servicing standards was held by the Senate Banking, Housing and Urban Development Committee, chaired by Senator Tim Johnson, on August 2, 2011. The witnesses included representatives from the Independent Community Bankers of America, the Hope Now Alliance, and the U.S. Department of Housing and Urban Development. Faith Schwartz, Executive Director of the Hope Now Alliance, emphasized the importance of achieving uniform, clear standards in mortgage servicing to improve the customer experience for at-risk homeowners. She highlighted the successes of the alliance's efforts, including the completion of 4.6 million permanent modifications through May 2011, but also acknowledged the difficulties faced by homeowners who fall through the cracks.

Key Takeaways:

• The foreclosure crisis has persisted for over four years, affecting both prime and non-prime credit borrowers, and has not abated despite efforts by the HOPE NOW Alliance.
• The alliance has completed 4.6 million permanent modifications through May 2011, but faces challenges in helping homeowners who are unaware of the available options.
• The desire for a single point of contact and a dual-track processing system is essential to provide clarity and consistency in the servicing process.
• The current servicer-investor relationship is complex and creates confusion for homeowners, and servicers must improve communication with borrowers to provide timely responses and information on options.
• HOPE NOW has hosted over 112 homeowner outreach events, with over half of participating borrowers rating the workshops as excellent, and 35-40% of participants being first-time contacts with their loan servicers.
• The unemployment rate of 30% among at-risk borrowers highlights the challenges faced in the crisis and emphasizes the need for multiple communication channels to assist borrowers.
• A single uniform standard for mortgage servicing is needed, and current initiatives must be evaluated, coordinated, and combined to achieve national standards.

Statistics:

• 4.6 million permanent modifications completed through May 2011.
• Over 112 homeowner outreach events hosted by HOPE NOW.
• 50% of participating borrowers rate the workshops as excellent.
• 35-40% of participating homeowners are first-time contacts with their loan servicers.
• 30% of at-risk borrowers are unemployed.
• HOPE NOW has worked with the U.S. Treasury Making Home Affordable program to host outreach events.

Sources:

• Senate Banking, Housing and Urban Development Committee.
• HOPE NOW Alliance.
• U.S. Department of Housing and Urban Development.
• Federal News Service, Inc. (transcript of the hearing).