Loss Mitigation

The U.S. government is encouraging short sales as a solution to the nation's still-growing foreclosure crisis, but insight from industry players indicates that borrowers and lenders alike are having trouble executing short sale transactions. To help lenders and servicers educate troubled borrowers on the benefits of opting for a short sale, DepotPoint and AssetPlanUSA have joined forces.

The FDIC is preparing to auction off a portfolio of loans it acquired from 19 failed bank takeovers. According to a preliminary announcement regarding the sale, the portfolio consists primarily of residential real estate acquisition, development, and construction loans with unpaid principal balances totaling approximately $610 million. About 80 percent of the loans are past due and classified as nonperforming.

The Federal Housing Finance Agency (FHFA) is extending the Home Affordable Refinance Program (HARP) through June 30, 2011. HARP is a key component of the Obama administration's foreclosure prevention efforts. It provides mortgage refinancing to borrowers whose homes have lost value and now find themselves owing more than the home is worth. Several industry groups have been lobbying FHFA to extend the program, arguing that it keeps creditworthy, performing borrowers out of unnecessary foreclosure.

Loan modification scams are on the rise, but HUD is taking action to put these con artists out of business. Preventloanscams.org was recently launched by the federal agency in partnership with a national coalition of public and private enterprises. The new system allows for better analysis of fraud trends across jurisdictional lines, which HUD says will likely lead to an increase in private enforcement action filings. Officials estimate that this online tool will assist approximately 50,000 homeowners who've been victimized by loan modification scams.

With short sales gaining in popularity, it comes as no surprise that two companies recently announced strategic partnerships with National Quick Sale, a short sale technology company based in Jacksonville, Florida. The company's two newest partners are REA Accelerated Marketing Group and Epic Real Estate Solutions.

As part of a coordinated plan to help as many homeowners as possible prevent foreclosure and stay in their homes, HOPE NOW, the industry-created alliance of mortgage servicers, investors, counselors, and other mortgage market participants, recently announced that it has expanded the HOPE LoanPort through its housing counselor partners in 25 states and more than 100 cities.

Moody's Investors Service projects the national rate of underwater homeowners could reach 50 percent by early 2011. Florida's All Statewide Property Corporation says it has found a solution to this dilemma by forming satellite limited partnerships to by bulk mortgages from lenders and reducing principal balances to current market values.

President Obama and his administration are floating an idea to prohibit lenders from foreclosing on a home unless the borrower has been considered for the Home Affordable Modification Program (HAMP). The proposal would also halt any foreclosures already in process once a borrower has been accepted into the trial phase of the program. A Treasury spokesperson confirmed that a foreclosure ban is under consideration, but stressed that it is one of many ideas on the table and has not been approved yet.

The administration's Home Affordable Refinance Program (HARP) is set to expire June 10. It's a central component of the government's foreclosure prevention efforts and is currently one of the only mortgage relief programs to help underwater borrowers. With the sunset date looming, several industry trade groups have joined forces to urge officials to extend HARP for another year, and they say a decision needs to be made quickly to prevent foreclosures on creditworthy borrowers.

Ocwen's Paul Koches offers insight into the industry's slow pace when it comes to mortgage modifications. Koches says the assumption that servicers make more money from foreclosures than modifications just isn't true. He explains the operational and technical obstacles that can hamper the modification process and offers concrete imperatives that could streamline and accelerate the loan modification drive.