Lenders Searching for Ways to Reach Delinquent Borrowers.

DALLAS -- Everyone knows that when borrowers stop making payments, they often stop returning phone calls from their home loan servicer as well.

Speakers at the SourceMedia Mortgage Servicing Conference keynote panel here said that their companies are taking proactive steps to try to contact more delinquent and defaulted borrowers, hoping to keep them in their homes or avert foreclosure with a loss mitigation solution. But in most cases, these borrowers avoid responding to phone messages and letters.

John Vella, president and CEO of EMC Mortgage Corp., said the steps taken to increase outreach to troubled borrowers are having an incremental impact. Those efforts include door knocking and sending FedEx packages to get the borrower's attention.

"Between all the 20 things we're doing outside the calls and letters, you probably get another 10%," he said. "You have to be creative and you have to have marketing people on your staff."

David Dill, president of Saxon Mortgage Services, said loan servicers have to play an educational role when borrowers run into trouble. But because the lender is already seen as an adversary at that point, he said it is even more important that counseling occurs before loans are funded. He noted that surveys of loan customers have found that a high ratio of borrowers with adjustable-rate mortgages say they didn't even know their payments will reset. Mr. Dill said servicers need to help educate and remind consumers about the nature of their loan product.

Stephen Staid, senior vice president of default administration at Litton

Loan Services, said that many of the borrowers who are facing onerous resets on adjustable-rate and option-ARM products approached their home purchase as investors, even in cases where the house is owner-occupied. He cited a study that found many first-time homebuyers expect annual home price appreciation upwards of 20% at a time when home prices are stalling in many parts of the country. Too often, those ...