![]() Woods: Recent storms such as Harvey have been a challenge for servicers. ![]() Q: What has been the impact of recent disasters on default rates and how far reaching and long-lasting are the effects? When rates eventually drop and you have to write down the value of your MSRs, it helps to have squeezed maximum value from the portfolio during the period when rates were rising. One way to “make hay while the sun shines” is minimizing losses. You need those MSRs to perform as well as possible to offset the volume decline. Still, if defaults rise along with interest rates, big bank servicers will want to shed the defaulted loans from their books by turning to special servicers.Īlso, loans and MSRs are going to stay on your books longer, have higher values and your refinance volume will slow. If you have a lot of ARMs in your portfolio, you can start to see payment shock issues. Historically, whenever you see rates on fixed rate mortgages rise, you will see borrowers opting for adjustable rate mortgages. Woods: Rising mortgage rates typically lead to less refinance activity and more defaults, although the economy is a bigger driver of default than an interest rate increase. Q: Do you have concerns about potential additional mortgage rate increases and if so, what are your concerns? If not, why are they not a concern? Staff can become entrenched in their servicing silos and finding people who have diverse skill sets can be difficult, especially when it comes to handling a loan cradle-to-grave. If default rates increase due to rising interest rates and/or softening of housing markets, mortgage servicers may again need more employees with unique skill sets who can perform customer outreach activity.Īnother concern is the increased emphasis on having employees handle specific loan-servicing functions as servicing organizations grow larger. With this cycle of change, people tend to re-market themselves leaving some servicing organizations with a lack of expertise to service re-performing loans (RPLs) and nonperforming loans (NPLS). Woods: The housing market has continued to improve nationally in recent years and borrowers continue to perform on their mortgage obligations, therefore reducing the immediate need for specialized default servicers. Q: What is the most prominent issue in mortgage servicing and special servicing? Woods has more than 25 years of experience in mortgage banking, with a special focus on default special servicing, portfolio management, client services and contract negotiation. To learn more about the risks mortgage servicers face in this current housing market – and how prepared they may, or may not, be for the events of tomorrow – MortgageOrb recently interviewed Janina Woods, senior vice president of private client services at Planet Management Group. Unfortunately, many mortgage companies don’t discover the true performance of their default software and processes until a wave of defaults actually hits. But a question remains as to how prepared most servicers really are when it comes to their default technology.
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