Loss Mitigation

Fannie Mae's Payment Reduction Plan (PRP) program will sunset on December 31, 2010. The GSE's PRP program was introduced in 2009 to provide a borrower with temporary payment relief while the servicer and borrower worked together to find a permanent foreclosure prevention solution. According to a notice issued by Fannie on Friday, all PRPs must be initiated by December 31st and must end within six months of commencement, or no later than July 1, 2011.

According to the Center for Responsible Lending, since the housing crisis took hold, 2.5 million homeowners have already lost their homes and another 5.7 million are at risk of foreclosure. It's projected that between 10 and 13 million foreclosures will have occurred by the time this crisis abates. The Center argues that the power to stop unnecessary foreclosures and stabilize local housing markets lies with state legislatures. The group says lawmakers should impose mandatory loss mitigation standards for all servicers prior to foreclosure.

Stewart Lender Services (SLS), a subsidiary of Stewart Title Company, opened a new National Processing Center in Coppell, Texas. Coppell is a city within the Dallas area. The center, which is equipped to staff around 110 people, will offer centralized mortgage loan origination and loss mitigation services, including short sales, for its customers.

Perhaps it was eager anticipation of the World Series kickoff, but Sen. Ted Kaufman's baseball analogy at a Capitol Hill hearing Wednesday clearly put into perspective a key defect of the Home Affordable Modification Program (HAMP) - a defect that watchdog groups and market observers have been lamenting for months now. And that is, Treasury's back-peddling of how many homeowners the program will actually help. ""What matters is not how often you swing the bat, but how often you reach the bases,"" Kaufman said.

FICO announced this week that its newest credit scoring product, the FICO 8 Mortgage Score, is now available from all three major U.S. credit reporting agencies. The FICO 8 Mortgage Score was built specifically to help mortgage lenders better predict mortgage performance and improve credit decisions for both current and prospective homeowners. The company says it will allow lenders to employ a more precise risk assessment tailored for today's real estate market in order to reduce the likelihood of default.

Treasury's latest report on the administration's Home Affordable Modification Program (HAMP) shows that over half of the trial plans started have been canceled and 11 percent of borrowers have re-defaulted on their new loan. The TARP special inspector general told Congress that HAMP is ""failing to meet its goal of preserving homeownership"" and risks igniting public anger and mistrust. A Fed economist says HAMP is a reflection of the Obama administration's ""failed policies,"" and the government must be prepared to ""pay lenders a lot of money"" to modify loans.

The Homeownership Preservation Foundation says calls coming into its hotline from distressed homeowners hoping to stave off foreclosure increased 7.4 percent in the third quarter of this year compared to the previous quarter. HPF administers the Homeowner's HOPE Hotline to provide consumers with foreclosure prevention counseling. The nonprofit received 412,353 calls during the third quarter. The largest call volumes came from the states of California and Florida.

With the mortgage industry reeling from foreclosure documentation problems, specialty servicers are in greater demand than ever to keep homes from entering the foreclosure process in the first place. Increasing demand requires greater efficiency to free up overwhelmed staffs, and specialty servicers like Wingspan Portfolio Advisors, are finding technology essential for maximizing both time and human resources. The company is employing DRI Management System's new Rincon solution to automate workflow tasks and handle more loans.

The Treasury Department released its monthly progress report on the administration's flagship foreclosure-prevention program Monday, and the results show that the Home Affordable Modification Program (HAMP) is continuing to lose steam. Servicers completed just 28,000 permanent HAMP mods during the month of September - 16 percent fewer than the previous month. More than half of all mortgage mods initiated under HAMP have been terminated, but officials say the program's ""rigorous standards"" mean better post-mod performance.

Trends are emerging that indicate ""fraud for property,"" i.e. fraud to attain homeownership, is returning to the industry. The analysts at Interthinx reached this conclusion after witnessing steep increases in two of the four types of mortgage fraud the company tracks. According to the firm's quarterly report released Monday, its risk indices for employment/income fraud and identity fraud in mortgage applications have both jumped more than 20 percent over the last year.