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Boosting Borrower Responsiveness in a Time of Crisis

Amy Neumann, FVP, Director of Late-Stage Delinquency, Default Servicing Operations, Flagstar Bank

Amy Neumann has more than 18 years of default experience, and serves as FVP, Director of Late-Stage Delinquency, Default Servicing Operations for Flagstar Bank. In her role, she manages late-stage delinquency for Flagstar, including foreclosure, bankruptcy, REO, and Flagstar’s Default Attorney Network. She oversees the operations performed by servicing vendors and attorneys, and the late-stage delinquency functions in-house at Flagstar. She joined Flagstar in 2015 from Trott & Trott PC, where she co-managed the litigation practice.

DSNews recently had a chance to catch up with Neumann at the Five Star Institute’s Single-Family Rental Conference in Dallas, Texas to discuss the state of the default servicing space and the steps Flagstar has taken to keep up with an ever-evolving mortgage marketplace.

Halfway through 2022, what are your main priorities and the problems you're trying to solve?
One of the biggest challenges is getting non-responsive borrowers out of foreclosure. Our clients, investors, regulators—they all want to avoid foreclosure. So, it's different, as a foreclosure manager, to spend more time focused on loss mitigation. You have to wear a different hat. We are continually looking for creative ways to engage non-responsive borrowers. We are under tremendous pressure, as a servicer, to get as many people as possible to reset their delinquency. There has always been a healthy tension between loss mitigation and foreclosure. This all seems to be exacerbated right now because of all the changes. The message is basically, "Avoid foreclosure, but you still have to meet timelines.” It has become a high-pressure area, trying to work through the foreclosure process, and help as many borrowers as possible.

Even though we completed large volumes of resets coming out of the foreclosure moratorium, there was still a significant default backlog, and I was concerned about the numbers. I was communicating with firms, saying, "Here's our numbers—this is concerning but we remain focused on our resolution efforts so the numbers will change.” We stepped up our game in terms outreach and were able to reset most of these borrowers by early 2022. With our enhanced outreach and the many programs now available, the path out of foreclosure has overall been a success.

But now we are dealing with borrowers who have simply buried their head in the sand. In the end, we cannot help them unless they communicate with us, and that has really become our focus of late. For those loans that are being referred, we are looking at those loans, to see what kind of response we're getting, whether it be a bankruptcy filing or direct communication for assistance, we continue to monitor to find out what's working and what's not.

Have you seen any changes in terms of borrow responsiveness over the course of the pandemic?
The opt-in rates for loss mitigation are very high. The far majority of borrowers are responsive. I think this is reflective of the fact that these are atypical defaults. Most of these borrowers have never been delinquent. They've made their mortgage payments on time and this pandemic came out of nowhere and caused so much disruption. They were, day one, calling in, asking, "What can I do?” That was by far the majority of our delinquent borrowers. These are the borrowers that are through a reset option and current.

Now that the pandemic is waning, we are left with a lesser population of borrowers who don’t engage. Many of these may have already moved on from the property. This group represents your more typical default population. To address this group, we are providing post-referral solicitations and in-person outreach. We have had significant success with these strategies. HAF (Homeowners Assistance Fund) programs have also been gaining traction, providing an additional path to resets, and increasing the overall response rate.

What do you anticipate as far as default and foreclosure volumes heading into 2023?
That’s the elephant in the room. The pandemic is waning, but what happens next? Nobody has a crystal ball, a year ago, what I would've said would be different than six months ago, etc.—economic conditions, assistance program offerings, and the regulatory environment continue to change quickly. I think we can all agree that the overall economic conditions are not looking very positive. We have increasing interest rates, inflation, and the threat of recession. Last month, the national average for bankruptcy filings was up 35%. These indicators typically mean an increase in defaults. Currently, default rates do remain low and steady. As a result, I would expect referral volumes to stay consistent throughout the rest of the year, barring any kind of unforeseen event. Meaning that I would not expect any material increase or decrease for the rest of 2022. Heading into 2023, volumes will largely depend on how these economic conditions unfold. We will continue to closely monitor the impacts to our volume to ensure we are prepared and that our attorneys are likewise apprised.

What have been your most important takeaways from the conference so far?
It's been so valuable to attend in person, to hear what's going on in the industry from the attorney perspective and from other servicers. It's invaluable information that can be missed during more formalized online forums. I learned a great deal about recent developments regarding the HAF program. Since HAF impacts foreclosure, the experiences shared, will help us improve our own processes. I also found the discussion on New York law to be more cohesive in this setting, again the casual discussion lent itself to a greater understanding of the loan level considerations required on New York loans.

About Author: Eric C. Peck

Eric C. Peck has 20-plus years’ experience covering the mortgage industry, he most recently served as Editor-in-Chief for The Mortgage Press and National Mortgage Professional Magazine. Peck graduated from the New York Institute of Technology where he received his B.A. in Communication Arts/Media. After graduating, he began his professional career with Videography Magazine before landing in the mortgage space. Peck has edited three published books and has served as Copy Editor for Entrepreneur.com.

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