Servicers Focus on Minimizing Default Loan Loss.(Conference notes)

Dallas -- Servicers continue to be focused on minimizing loan losses for lenders and investors and restoring liquidity to the mortgage market.

At the SourceMedia Mortgage Servicing Conference here, speakers said the impact of the subprime mortgage crisis has created one of the most challenging environments the industry has seen in 20 years.

Larry Litton Jr., president and chief executive officer, Litton Loan Servicing, said more servicers are going out into the field and working with consumers to bring down barriers.

He said 35% of borrowers over an 18-month period are going back in to default. Mortgage servicers are hiring seasoned talent and leveraging every opportunity from a capacity perspective to do more to connect with borrowers in fear of default. They are studying analytics over their vendors like never before, he said.

Real estate-owned assets are scaling up quickly in areas with declining values. These days, the speakers said there are a lot more REO auctions going on. It used to be investment buyers were purchasing the homes, but now the trend is first-time homebuyers who are looking for a deal. Lenders are still keeping investment lists for them to pick and choose REO properties to bid on.

Servicers are not waiting until the property is foreclosed on to liquidate the asset. They may market it even before it is all the way through the foreclosure process.

States like Maryland are extending the foreclosure timeline. Servicers must be ready to move quickly and focus on regulatory issues, said Greg Zeeman, executive vice president, chief servicing officer, HSBC Consumer and Mortgage Lending. "This is another cost but it is a must," he said. "Look at the pipeline of ARM resets. Deal with customers in advance to delinquency and modify the loan in advance."