Loan modifications continue to be a smart move politically and from a risk management perspective, and new technology is aimed at streamlining the way qualifying documents are moved between borrowers and loan servicers.
"One of the biggest issues is the quality of the documents, and the documents having to be resent for being incomplete or incorrect, or having missing information," says Joseph Smith, CEO of Default Mitigation Management.
DMM just introduced docUmods, an online loan modification product. Using a web interface that includes tips on filling out documents, docUmods guides the user through a series of questions to complete the necessary forms online, the way Turbo Tax walks users through tax form preparation.
The mortgage modification forms include the Home Affordable Modification Program's Request for Mortgage Assistance form, form 710 (a uniform borrower assistance form used by servicers to obtain financial information from a troubled borrower), and IRS Form 4506-T (a request for a transcript of a tax return). Other forms include hardship letters, Dodd-Frank compliance forms and requests for additional financial information used in processing modifications.
After filling out the questionnaires, users sign and date the forms and can fax or electronically submit them via email to lenders or other parties using the DMM Portal. Smith says product testing has resulted in more than 95% of initial submissions being accepted by servicers as accurate. "It takes 25 minutes to get through, and the documents are correct," Smith says.
Smith says the product is aimed at all stakeholders in modifications, with primary use cases including lawyers, credit counselors and actual borrowers. Smith says the pricing is variable depending on use, and added a handful of state courts, including Wisconsin and Florida, are considering using the new product as part of their distressed mortgage programs.
Other companies are also active in loan modification document management. A spokesperson for Hope LoanPort, an e-commerce loss mitigation company, says its web engine connects stakeholders involved in the foreclosure prevention process, and also said the company partners with more than 4,000 housing counselors and over 85% of the mortgage servicing market. Its program enables homeowners to submit an application online to their mortgage servicer. The software assists stakeholders (counselors, servicers and homeowners) in collecting the documentation and data required for federal home retention programs, which would include HAMP. Also, the technology can assist with other processes such as proprietary loan modifications, repayment plans, forbearance agreements, partial claims, as well as liquidation options such as a short sale and deed in lieu of foreclosure.
George Fitzgerald, senior vice president, product management, servicing solutions and technology for Lender Processing Services, says his company's ClosingStream document management product administers and delivers documents to borrowers at each stage of the modification process, and where permissible by state law allows borrowers to electronically sign documents for seamless transfer to servicers. "Managing the documents required for loan modification is extremely important, but servicers can't do this in a vacuum and separate it from all of the other pieces of a large and complex fulfillment process...that's why there has been, and continues to be, so much work done in loan modification technology."
Fitzgerald also says LPS has streamlined the ongoing capturing, reporting and application of incentives earned by the performing modified borrower throughout the terms of his or her new loan, as well as the entire "step rate" process that takes that borrower back to the standard rate that was in place at the time of the modification.
Analysts wonder how often borrowers actually modify their loans.
"Loan modifications are simply origination systems. If you are going to do a loan modification you just have to go back and reorganize what you have...and find out if you can do this loan based on these new terms. This new tech is a solution that would allow consumers to deliver all of this information to servicers more quickly and more efficiently than they do now, but how many times will you want to modify the same loan?" says Christine Pratt, a senior analyst at Aite.