Editorial: Headline Risk.(risk posed by media coverage of mortgage banks loan recovery efforts)(Editorial)

If there was an overarching theme at this year's MBA Mortgage Servicing Conference it was the fear of "headline risk."

Nobody needs to be reminded how dangerous bad news about aggressive collections and foreclosure practices can be. Just think about what happened to Fairbanks Capital, once among the industry's highest-rated subprime servicers. The brand became so reviled that the company's owners abandoned the name.

And these days, the mainstream media is focusing a spotlight on every indication that defaults and foreclosure activity are on the rise. Add into the mix the debate about the "suitability" of nontraditional mortgage products for some borrowers and you have a combustible environment. Sooner or later, most servicers are probably going to have cases where a bad set of facts, such as a compelling hard-luck story, turns a routine foreclosure proceeding into a potential media circus.

In that context, it was interesting to listen to servicing executives during a "default super session" at the conference. Many say they are willing to take steps that once would have been largely outside the purview of a servicing shop to mitigate headline risk.

"We'll do a lot of creative ...