In the years since the housing crisis we've made important strides in making the servicing industry stronger, more efficient and better able to help struggling borrowers. Now we're working to prepare for a new future in servicing, or a "new normal" as we like to call it at Freddie Mac, since we expect the post–crisis servicing model of the future, 2017 and beyond, to look very different than it does today. In doing so, it's valuable to take a look at the lessons we learned during the crisis.
While there was a lot of trial and error over the last seven years, we learned there were 5 major factors for successful loss mitigation:
- Lower payments. Sufficient payment relief is probably the biggest predictor of long–term success for borrowers and it also drives ongoing modification performance.
- Earlier borrower engagement. The earlier you can engage with a borrower, the better your chances of completing a modification and the better it performs over time.
- Reduced documentation. This has been a clear winner for both servicers and borrowers by creating process efficiencies for servicers while reducing barriers to assist homeowners.
- Simpler programs. Simple is better for a reason – complex requirements translate into inconsistent application of programs.
- More feedback. Feedback has been critical in helping us to evolve our programs and policies so we introduced more forums to listen to customer feedback. Importantly, we also took action.
VP Yvette Gilmore discusses these and mortgage servicing's "new normal" in Executive Perspectives.
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