When servicing mortgages made to homeowners with less than perfect credit, it isn't what you do - it's when and how you do it, experts say.

Early intervention is crucial to keeping these loans - made to borrowers who have a history of paying bills late - out of delinquency, says John Hess, investor relations director for United Companies Financial Corp., Baton Rouge, La.

In fact, most companies that service these loans make a phone call before the first payment is even due to establish a relationship with the customer.

And in the hands-on world of subprime servicing, "the relationship with the customer is really the key," to avoiding delinquencies, Mr. Hess said.

Once a relationship is established, frequent, early calls are the norm. "We call once an account is 15 days late," said a spokeswoman for the Money Store, Sacramento, Calif. Servicers of A-quality loans usually wait until a loan is at least 30 days past due to call the borrower.

Advanta Mortgage Corp., San Diego, makes calls to borrowers before payments are due, said Bill Garland vice president for loan servicing.

Workouts need to be negotiated before a customer is two months behind on mortgage payments, said Mike Hyman, senior vice president of marketing, Wendover Funding Inc., Greensboro, N.C.

"Once someone is two payments down, it's very rare for them to get caught up," he added.

Collectors need to have the ability to convince customers to send funds as quickly as possible, he said.

"As soon as a customer says, 'I have a problem,' the light in a collector's head has to go on," he said. "There's a real counseling aspect to the job," Mr. Hyman said.

Consequently, collection agents for subprime loans need to be more experienced than servicers of conforming loans. "The farther down the alphabet a loan is, the greater number of years of experience that collector should have," Mr. Hyman said.

Wendover Funding sends collection agents to its "default university" to train them to deal with seriously delinquent loans.

Because of the extra time, energy, and technology required for collection, subprime loans cost 30% to 40% more to service than conforming loans, Mr. Garland estimates.

The company's pool of more than 60,000 loans is handled by 47 collection agents, with help from a dialing system that picks borrowers from the servicing files who are considered ripe for a phone call.

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