lessons from the front lines counselor perspectives on default interventions homeownership...
TRANSCRIPT
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Lessons from the Front LinesCounselor Perspectives on Default
Interventions
Homeownership Preservation Initiative (HOPI)
October 2007
Do not cite or distribute without permission of NHS Chicago
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Goals
• Track perceptions of counselors on the “front lines”
• Look for positive changes in borrower-servicer relationships
• How much progress are we making, collectively?
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Survey of Default Counselors
Source: NHS Default Counselor Survey 2007
• Emailed to 400 counseling professionals in May & October 2007 – approximately 1/3 response rate
May: 139 responses – 113 practicing counselorsOct: 78 responses – 61 practicing counselors
• In total served 25,000 clients last 12 months
• 30% work at organizations with >5 “default counselors”
• 82% provide counseling directly
– remainder oversee staff conducting counseling
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Which best describes changes in demand for default counseling services in the last 6 months?
0%
10%
20%
30%
40%
50%
60%
Decreasedmore than50%
Decreasedby 10-50%
No change
Increasedby 10-50%
Increasedby 51-100%
Increasedby 101-200% ormore
Source: NHS Default Counselor Surveys 2007
Demand is accelerating.
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Shift from Job Loss to ARMsWhat is the most frequently reported cause of default or
foreclosure among your clients?
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
Healthproblem/Illness
Job Loss Consumerdebt/expenses
ARM Resets Other
May Oct
Source: NHS Default Counselor Survey 2007 (104 experienced counselors)
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Counselor Evaluation: Major Problems
Source: NHS Default Counselor Surveys 2007
What share of borrowers that you have seen involve fraud, loans that the borrower could never have afforded or 'exploding ARMs'?
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
Fraud Payments NeverAffordable
300+ BPS ARM Resets
May Oct
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Most Common Outcomes Observed by Counselors
How common is each outcome for borrowers in default that you counsel?% Very Common
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
Repaymentplan
Loanmodification
Foreclosureauction
Current withforeclosureprevention
loan
Forbearance Sale of home Refinance Current withown funds
May Oct
Source: NHS Default Counselor Surveys 2007
++ - -
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Ratings of 22 Subprime Servicers
Source: NHS Default Counselor Surveys 2007
• Rate each institution's loss mitigation department based on your experience in the last 6 (six) months.
• 1-4 scale: 1: Very good to work with2: Fairly good to work with3: Fairly difficult to work with4: Very difficult to work with
• Average: 2.5 – between fairly good-difficult– No changes from May to October – but more variation for each lender
• Range 1.0 to 3.7 - experiences uneven– Key finding: Within institutions counselors have varied experiences.
» Even the ‘best’ have issues/problems as identified by counselors
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How helpful is it in creating loan workouts to have a designated contact?
Extremely helpful
53%
Very helpful24%
Somewhat helpful
18%
Not at all helpful
1%
Somewhat unhelpful
4% Reduces time on hold, making call backs, etc by 15.4 minutes per client.
Saves counselor serving 100 clients 3.2 days in client service time per year.
Source: NHS Default Counselor Surveys 2007
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Treatment of Counselors Improving
Source: NHS Default Counselor Surveys 2007
Best describes how you think the "typical" loss mitigation staff person feels about you when you are working with them on behalf of a client?
0%
10%
20%
30%
40%
50%
60%
They value myservices as a
fellow professional
They tolerate myrole but arerespectful
They barelytolerate my role
and not respectful
They are openlyhostile and
frustrated I aminvolved
May Oct
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Flexible Options Are Being Used Enough?
How often will any servicer or lender perform the following with your clients?
0%
10%
20%
30%
40%
50%
60%
70%
80%
Change an ARM intoa fixed rate loan
Reduce/write-downthe principal balance
Waive fees andaccrued interest
permanently
SometimesRarelyNever
Source: NHS Default Counselor Surveys 2007
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Borrowers View Servicers Poorly
Which best describes how borrowers in default view their lender/servicer, in general?
Intimidated38%
Frustrated45%
Borrowers have no opinion
3%
Angry13%
Positive 1%
Source: NHS Default Counselor Surveys 2007
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Counselors: Recent Servicer EffortsWhich best describes changes you have observed among lenders/servicers working
with borrowers in default in the last six (6) months?
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
Much morerestrictive/harder to
work with
Somewhat morerestrictive/harder to
work with
No change Somewhat moreresponsive
Much moreresponsive
May Oct
Source: NHS Default Counselor Surveys 2007
Sign of improvement
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Why do borrowers fail to contact their lender when they have trouble making payments?
Don't know lenders can provide options 53%
Too depressed/stressed 26%
Think they can get by on their own 12%
Lenders mistreat them (write in) 10%
Most counselors wrote about multiple problems.
Consistent with borrower surveys and interviews
Source: NHS Default Counselors Surveys 2007
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Expectation for demand for nonprofit foreclosure services over the next year?
Demand will increase a lot
71%
Demand will increase a little13%
Demand will decrease a lot
14%
Demand will stay the same1%
Demand will decrease a little1%
Source: NHS Default Counselor Surveys 2007
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Counselor Feedback• “problems are becoming overwhelming for the counselors as
well…we need to work better together”
• “lenders need to realize we can play a ‘broker’ like role because we may have real relationships with people and more accurate information”
• “immediately patch us through to the decision makers rather than wasting our time”
• “create a better system for accepting authorization forms. A 24 hour delay, in many cases, is too long”
• “need to bypass the gorillas in collections”
• “create special processes/products if a nonprofit is involved—like we did on originations”
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Looking Forward: More Work to Be Done
• Some evidence counseling-lending relationship getting better; more modifications being made
But housing values and surge in demand are challenges
• Improve connections between counselors & lenders Increasing need for services
• Expand use of modification strategies Disseminate innovations more evenly across institutions
• Borrowers need to better understand options & overcome emotional responses
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