Demand Grows for Workout Specialists as Delinquencies, Foreclosures Rise
Freddie Mac announced it is suspending foreclosure sales on mortgages eligible for the Home Affordable Modification Program as part of the Obama Administration’s Making Home Affordable plan. Freddie Mac’s previously announced suspension of foreclosure sales on occupied properties expired on March 6th. Ingrid Beckles, Senior Vice President of default asset management at Freddie Mac says the announcement “underscores Freddie Mac’s commitment to the successful implementation of President Obama’s Making Home Affordable initiative, and builds on our ongoing efforts to prevent unnecessary foreclosures.”
Specifically, Freddie Mac says it will instruct its servicers not to complete a foreclosure sale on a mortgage eligible for the Home Affordable Modification program unless they completed their effort to contact the borrower and either the borrower did not respond or lacked the capacity or willingness to participate in either the Home Affordable Modification program or any other Freddie Mac workout option.
Freddie Mac also recently unveiled a new workout strategy for high risk loans designed to keep more at-risk borrowers in their homes, according to AFP. The report says the plan employs third party servicers that specialize in servicing Alt A and other types of higher risk mortgages.
“A workout strategy is only as successful as the number of knowledgeable counselors available to answer the phone. Our strategy for high risk loans is designed to help servicers cope with today’s unprecedented call volume by directing calls to a specialist with the specific staff and technical resources for handling a high volume of borrowers with these types of mortgages,” said Beckles.
Under the new pilot, a selected portfolio of higher risk mortgages that are at least 60 days delinquent will be given to a specialty servicer for intensive attention using the full range of Freddie Mac workout opportunities, including the Streamlined Modification Program developed with the Federal Housing Finance Agency, Fannie Mae… and the HOPE NOW Alliance.
Loan Workouts on the Rise
HOPE NOW, the private sector alliance of mortgage servicers, non-profit counselors, and investors, says it has been working aggressively to prevent foreclosures. The group recently announced that its members and the larger mortgage lending industry modified 123,000 mortgages in January 2009 alone. This is the first time that the number of mortgage modifications exceeded 100,000 two months in a row since HOPE NOW began to compile data in July 2007.
HOPE NOW also announced that the industry initiated 125,000 formal repayment plans in January, in line with the record-high set back in October 2008. The combined total of mortgage modifications and repayment plans represents a 4% increase over the record-high set in December 2008. Faith Schwartz, HOPE NOW’s executive director, says it’s clear that the mortgage problem is still growing. “The constantly growing use of modifications as the primary way to help homeowners is very likely to continue,” she says.
Moreover, HOPE NOW data shows that modifications were approximately half of all solutions offered to homeowners in January 2009 and the number of foreclosures started in January increased by 14,000 over the previous month.
The HOPE NOW Alliance also reveals that completed foreclosure sales increased from 56,000 in December to 68,000 in January. Since then, RealtyTrac has released its February 2009 U.S. Foreclosure Market Report, which shows foreclosure filings — default notices, auction sale notices and bank repossessions — were reported on 290,631 U.S. properties during the month, an increase of nearly 6% from the month before and an increase of nearly 30% from February 2008. The report also shows one in every 440 U.S. housing units received a foreclosure filing in February.
“The increase in foreclosure activity from January to February is somewhat surprising, given that many of the foreclosure prevention efforts and moratoria in place in January were extended through most of February as well,” said James J. Saccacio, CEO of RealtyTrac.
The latest U.S. Foreclosure Index released by ForeclosureS.com, a real estate information provider, also shows that completed foreclosures in February reached the highest monthly total since the foreclosure crisis began, soaring by more than 67% over January, according to RiskCenter.
The report quotes Alexis McGee, President of ForeclosureS.com as saying, “Annualizing the first two months of this year, if foreclosures were to continue unabated, we could end up with another 1.2 million homes back in lenders’ hands by year-end. However, I am hopeful that our new administration’s plan to stem the foreclosure tide will take hold and we will see fewer foreclosures by year end. The Fed means business, and they’re throwing money—lots of it—behind the foreclosure crisis.”
Looking Ahead…
Pressure is mounting to restructure or workout loans that are delinquent or likely to default. Executive search firm, A.E. Feldman, says the trend is creating opportunities for candidates with expertise in underwriting, restructuring, valuation and loan workouts.
A.E. Feldman adds the fields of fraud and litigation as well as forensic accounting are also getting hotter. Membership in the Association of Certified Fraud Examiners (A.C.F.E.), which was founded only in 1988, has increased by more than 50% since 2003 to 45,000 members. The executive search firm also says accounting jobs, particularly fraud and litigation opportunities as well as business valuation jobs are opening up. CPAs with expertise in forensic accounting are also in a prime position to benefit from the surge in demand.
Are you a workout specialist or expert in valuation, bankruptcy or forensic accounting? If you want to grow your career or your company’s bottom line, contact A.E. Feldman’s President, Mitch Feldman, today.
