MORTGAGE LOAN COMPLIANCE®

Some Democratic senators want servicers to be prepared for a coming wave of resets on payment-option adjustable-rate mortgages and start contacting borrowers that may not be able to afford the increase in their monthly payments.

In a joint letter to Treasury secretary Timothy Geithner, the Democratic senators, including Jack Reed, D.-R.I., note that one million option ARMs could reset over the next four years. "Without servicers taking pro-active steps to reach these homeowners and careful vigilance by the Department of Treasury and others to ensure that outreach translates into relief, efforts to stabilize the housing market could be undermined," the letter says. Senate Banking Committee chairman Christopher Dodd, D.-Conn., is one of the signers.

The senators also expressed concerns that servicers don't have enough capacity to deal with the demand for loan modifications. And homeowners that want help before they go into default are being put on hold. "It is also our understanding that as servicers take a triage approach to responding to inquiries, homeowners who are still current on their payments but at risk of foreclosure are being told to wait for assistance — even as their economic conditions worsen," the letter says.

Servicers need a better and less expensive way of doing all that is required at a time when the old processes of verification are not working. And, often what needs to be done requires too many steps, too many processes, to ever be efficient with the resultant lower costs. It can be easy then to ignore or miss one of the many steps that need to be taken.

A loan modification must not only fit a borrower’s current repayment abilities, but must meet future estimated abilities, adding to the analyses that must be done. If the borrower works for a company that has announced prospective staff reductions will he or she lose a job sometime in the next year and thus the ability to again make mortgage payments? Should this be considered?

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Mortgage Loan Compliance

www.ml-compliance.com