Loss Mitigation for Good Loans Goes Up.(Managing REO)

Byline: Amilda Dymi

New York-Adventity Inc. finds the newest market trend, beyond the unprecedented loan volume that has made outsourcing the best way to approach loss mitigation, is that foreclosure risk no longer involves subprime loans only.

According to Adventity CEO Niket Patankar, because the economy is bad and because people who bought their houses in better times when they expected growth are losing jobs instead, alt-A and good paper is also coming into the market.

Job loss and inability to afford mortgages are increasing the pool of foreclosure risk loans and negatively affecting homeowners credit scores. The executive said he could see how the crisis has deepened since late 2007 when Adventity opened its loss mitigation department in the units over 100% growth quarter-to-quarter.

One of the trends were seeing is that some of the good-quality loans which were in the A category now tumble. And that, he said, is a very sensitive business, since enabling lenders to help borrowers retain their homes is not always successful and in some cases nothing can be done.

Various options are available for the loss mitigation process. Outsourcing and demand for loss mitigation services has definitely increased in the market. So far the volume of delinquencies has been limited to a certain manageable amount with banks and lenders being capable to handle that. Now, due to the subprime market crisis, even good A paper is slipping into delinquency as people lose jobs and incomes.

Following the rapid increase of delinquent loans lenders are challenged by the unexpected loan volume they need to process. Mostly there are cases of one- to three-month delinquent loans, which are likely to go into foreclosure. It requires a different approach to handling it.