Loss Mitigation

The nation's second largest mortgage company says early workouts are central to its game plan for 2011. This ""nip it in the bud"" mindset can be key to getting in front of delinquencies before they turn into lost-cause foreclosures, and Freddie Mac says it's making changes to the way it evaluates the performance of mortgage servicers in order to ensure problem loans are tackled early on and increase the odds of getting borrowers back to performing status. Namely, the GSE is pushing servicers to make contact with homeowners by the third day of delinquency.

Woodward Asset Capital has announced plans to launch a new short sale technology application in April that the company says will prevent short sale fraud while reducing transaction times and netting lenders the highest possible sale price. Woodward explained that its new software, VerifiedShortSale, puts the mortgage servicer in control be being first to review every offer while ensuring a transparent process. It's modeled after the company's REO application, OfferSubmission.

After the House passed measures to terminate several federal foreclosure prevention programs, Rep. Steve Cohen of Tennessee stepped in with a measure of his own - a bill that establishes a grant program to fund efforts by state and local governments to provide mediation between homeowners and lenders in order to pursue alternatives to foreclosure. The mediation would postpone sheriff sales of owner-occupied residences until viable options to avert foreclosure have been explored.

Default Resource, a provider of REO management, valuation, and loss mitigation services, has announced the hiring of James Zeldin as EVP and chief sales officer. Zeldin brings more than 20 years' experience in default management, origination services, REO management, and business process consulting to Default Resource. He previously served as SVP of business development for Altisource Portfolio Solutions and its predecessor company, Ocwen Financial Corporation.

State attorneys general say they are willing to work with mortgage servicers to reach a settlement deal that would resolve the joint investigation of industry practices that led to last fall's robo-signing scandal and widespread foreclosure moratoriums. But no slap on the wrist will do. The group wants to see ""fundamental changes"" to the way servicers run their business when it comes to handling delinquent borrowers or they'll turn to the courts for resolution.

Morningstar, Inc., a provider of independent investment research, announced Monday that its Realpoint unit has launched an operational risk assessment practice to evaluate the performance of mortgage servicing firms. Morningstar says the new practice, which is part of Realpoint's credit ratings business, will complement the company's convention of providing transparency and insight to investors in mortgage-backed securities.

Word on the street is that Goldman Sachs is looking to sell off its mortgage servicing arm, Texas-headquartered Litton Loan Servicing. One publication's blog post says Litton never proved to be the distressed mortgage cash-cow that Goldman had hoped, while another financial news outlet reports that the servicing unit is indeed unprofitable at the moment. Industry data show that Litton's servicing portfolio has contracted by nearly 35 percent over the last two years.

With so much attention focused on the House's efforts to stamp out four federal foreclosure programs, a bill making its way through the Senate - which like its House counterpart would effectually terminate the Home Affordable Modification Program (HAMP) - has received less attention but is progressing nonetheless. Pundits insisted such legislation would fall flat in the Senate, but members of the chamber's Banking Committee are pushing their bill forward on the argument that the free market, on its own, is working where government programs are faltering.

House Republicans may have succeeded in passing legislation to end federal housing programs that are intended to provide assistance to unemployed homeowners and support efforts to clean up vacant foreclosed homes, but their Democratic counterparts aren't going to take it lying down. Rep. Barney Frank, the top-ranking Democrat of the House Financial Services Committee, has introduced legislation that would require the biggest banks and hedge funds to cough up $2.5 billion to keep those very same programs alive.

There were many who opposed the hefty bank bailouts after the financial crisis set in, and they still have their ethical argument against the government's decision, but the fiscal argument is growing faint. Treasury announced this week that over 99 percent of the funds disbursed to banks through the Troubled Asset Relief Program (TARP) have now been recovered. Even the largest bailout of all - that of Fannie and Freddie - is expected to shrink by nearly half over the next 10 years.