Since last month's announcement by President Bush to help homeowners with subprime, adjustable-rate mortgages stave off foreclosure, many mortgage servicers have been working overtime to keep people in their homes.
I know this because the nonprofit credit counseling agency I oversee has taken calls from thousands of Americans seeking help with their delinquent mortgages. Each call means that our agency, and the homeowner's servicer, work several hours to help each homeowner keep their home with a monthly payment that is suitable to their lender.
Many more Americans are expected to seek help to avoid foreclosure this year. Fortunately, we will soon be involved in beta testing software that will make helping homeowners more efficient for everyone — homeowners, counseling agencies, and servicers. The long-term impact could be enormous — possibly saving hundreds of thousands of homes a year from foreclosure.
Today, helping a delinquent homeowner find a solution in the face of an imminent foreclosure is very time-consuming. The counselor gathers the homeowner's financial information to determine the depth of the problem and the potential for working out a solution.
The next step is a telephone call or e-mail to the servicer. Often, the counselor ends up making several calls back and forth to the servicer and homeowner. After each set of calls, the counselor may have to follow up with paperwork — sending faxes to each party, receiving counterproposals, correcting errors, and making new proposals.
The software under development will address these delays and speed up the workouts. It is being built on Computer Sciences Corp.'s Early Resolution platform, which is already used by some of the nation's largest lenders.
This decision-making tool to identify the best workout options is being enhanced with standard data collected during counseling. This will enable credit counselors to review workout options with each homeowner based on his or her unique situation that should also be acceptable to the servicer.
Once the software is up and running, we will be able to transfer a homeowner's data electronically to the servicing company immediately after the counseling session. This will let workouts be completed much more quickly.
The programming effort is being led by Wells Fargo & Co. and two other major financial services companies. We anticipate that the programming and beta testing will be completed in early 2008. Then the software will be made available to other servicing companies, as well as to other nonprofit counseling agencies.
I believe this initiative has the potential to transform the housing counseling service sector and the mortgage servicing industry. The software will benefit everyone: It will make it easier for both counseling agencies and mortgage companies to work out solutions for homeowners and stave off foreclosures.
A single housing counselor can comprehensively counsel about 1,200 homeowners per year. Our research shows that 75% of home-owners who call our agency within three months after becoming delinquent on their mortgage can avoid foreclosure.
Simple arithmetic tells us that the software will benefit many people, as well as communities and financial institutions that rely on them. It is a product that will stabilize families and the mortgage industry.
