Servicing subprime mortgages is a whole different ball game, say leaders in the rapidly growing field.
To keep delinquencies under control, most subprime lenders have made heavy investments in technology recently, said Gordon L. Monsen, a managing director with PaineWebber Inc., New York.
The technology is intended to bring greater efficiency to what is still largely a hands-on job: collecting payments from borrowers who have a history of lateness.
Most servicers start by establishing a relationship with the customer with a welcoming phone call. They then keep in close touch, making a call as soon as borrowers are late with a payment.
"I've seen a tremendous move to computer-supported servicing in the past year and a half," Mr. Monsen said. "It's been a very successful campaign."
Lenders insist that, while technology may be important, experienced collection agents are invaluable. In high demand right now are experienced telephone operators who know how to coax payment from overextended homeowners.
United Companies Financial Corp., Baton Rouge, La., has banks of collectors wearing head sets, engrossed day and night in dialogue with borrowers who have let their payments slide. The company's servicing portfolio of $4.2 billion is handled by more than 50 full- and part-time collectors.
The collectors need to be friendly but firm, explained Jim Pickett, collections manager at United Companies.
"You don't want to alienate the customer," when you call about late payments, Mr. Pickett said. "When you call, they're edgy already."
When people with conventional loans are delinquent and make a promise to pay, they usually follow through, said Hugh Miller, president of Delta Funding Corp., Woodbury, N.Y. But subprime borrowers are different and need more encouragement, he said.
"My favorite word here is empathy," Mr. Miller added. "You have to come to the borrower as a friend, but apply enough pressure that they come through" with a payment, he said.
Delta's senior collection staff is a small team with a lot of experience, Mr. Miller said. Successful collection of subprime loans, especially seriously delinquent ones, demands it, he said.
Companies with experience lending to borrowers with poor credit records rarely pass off servicing. Most often, the company that makes the loan also services the loan.
But as newcomers flock to subprime lending from the increasingly commoditized conforming mortgage market, well established subprime players are cashing in on their expertise and purchasing servicing rights from the novices.
Delta may look to do servicing for others, Mr. Miller said, but the company will wait until it has its new computer system "down like clockwork" before it takes on new business.