Franklin Credit Management Corp., a Jersey City servicer of subprime mortgages, has started a nationwide door-knocking service that tries to contact delinquent borrowers on behalf of the creditors.
Gordon Jardin, Franklin Credit's chief executive officer, said last week that it started its Face-to-Face Home Solutions division this year as part of a repositioning of the company, which now offers underwriting, due diligence and asset valuations.
Sometimes the division sends Franklin employees to borrowers' homes, but usually the visits are made by one of its 300 contractors around the country. Often the purpose of the visit is to find out whether the home is occupied and what the borrower intends to do, Franklin said.
Titanium Holdings Inc. of Salt Lake City offers similar services through its network of 11,000 "home retention consultants."
Franklin services 32,000 loans, most of them second mortgages, with a face value of more than $2 billion. Much of its portfolio was repossessed this year by Huntington Bancshares Inc. of Columbus Ohio, as part of a workout of commercial loans to Franklin. The $54 billion-asset Huntington had inherited the relationship from its 2007 purchase of Sky Financial Group.
In a conference call in April, Huntington said it had reduced its exposure to Franklin by 8% from Dec. 31 to $477 million on March 31. The banking company said it is working to "rapidly reduce exposure to this portfolio" — it is offering refinancings to borrowers whose loans would be eligible for sale into the secondary market while Franklin oversees collections, loan deferrals and modifications and short sales.
"We are definitely actively involved in trying to find ways to maximize the returns to Huntington on that portfolio," Jardin said.
Before the loans were repossessed, Franklin's strategy had been "to maximize cash flow," but now Huntington wants the servicer "to work out the loans," he said.
"I think most companies are trying to determine what their strategy should be," Jardin said. "It's too early to determine how well the performance of loans will be if we modify them" under the Obama administration's Home Affordable Modification Program.
Face-to-Face "has had the beginnings of some success" in reaching delinquent borrowers, though it is too early to tell if the contact rate is better than the industry average. Roughly 50% of delinquent borrowers have no contact with their servicer before a home goes into foreclosure, according to Freddie Mac.
"That's frustrating, because you do have a legal contract. You have an agreement with the borrower, and why they can't make a payment often is unclear," Jardin said.