Sunday, February 17, 2008

Walking Away or Hiding Away?

by Tanta on 2/17/2008 11:25:00 AM

Mortgage servicers: this is called "reaping what you sow."

Spend decades building ever-larger, more consolidated servicing portfolios through mergers, acquisitions, and bulk purchases. Chase marginal improvements in efficiency with automation, out-sourcing and off-shoring. Wall yourselves and your "platforms" off in centralized compounds far from your customers and their local markets, withdraw behind consumer-proof phone menus, worthless web portals, and untrained "customer service representatives." Keep your performance statistics up with aggressive collection practices; keep your operating costs down with robo-calls and impenetrable scripting. Manage yourself quarter-to-quarter with frequent purchases and sales of loan servicing in rapid succession, confusing and alienating your current and former customers, losing track of payments and account numbers, cancelling automated payment provisions at a keystroke, performing three escrow analyses (with three payment increases) in a single year. Hire a subservicer to do the grunt work, adding another layer of impenetrability and forcing even more "cost-cutting" measures to keep the subservicer profitable. Outsource your default servicing and REO management functions to a third party who talks to your own staff via phone menus and searches for ever more creative ways to extract fees from consumers, since you don't pay much. Encourage an entire cottage industry of hucksters, scammers, and pick-pockets to grow up around you, like fungus, in the name of providing "counseling" or "negotiation" or "foreclosure avoidance" services, assuring that your customers will no longer be able to tell who is legitimate and who isn't. Demonize community-based homeowner-advocacy services until you need to co-opt them to bolster your own absent credibility.

Eventually you find yourself sending pleas to your customers to return your calls disguised as wedding invitations. You have borrowers who choose the lesser evil of losing their homes in silence rather than the greater evil of trying to deal with you. Your response is to use someone else's letterhead. This, you think, will make you look trustworthy. After all, most of us already associate deceptively-packaged mailers with the same fast-talking brokers who got us into these loans we don't understand. But if it worked once, it might work again. What other choice do you have? We installed our own caller ID technology to cope with your endless annoying solicitations and hostile collections department. Goose, gander.

Your biggest fear is that we, the borrowers, will re-brand ourselves as efficient exercisers of put options and make you eat that $50,000 per loan. We will hire consultants. We will use someone else's letterhead. Somewhere in the United States, at this very moment, a borrower is folding up his deed, stuffing it into a fancy engraved wedding-invitation envelope, and writing your address on it. You will be astonished.