Before 2007
Historically, the Loss Mitigation Department of a mortgage service company was one of the smaller departments in a mortgage service company. Mortgage delinquency rates had been very low for many decades. Often, loss mitigation was a part time function for the collect department. Usually, it was possible to modify a mortgage within 3 to 6 weeks. A mortgage service company employee might handle the entire transaction from the first telephone call to the issuing the final mortgage modification agreement. Concluding a short sale took little longer than any other sale. There were few modifications and short sales. Most mortgages were paid on time and property values generally were greater than mortgage balances. The loss mitigation negotiators were experience mortgage professionals with practiced experience applying the loss mitigation guidelines for the mortgage.

A mortgage requiring more than 90 days in loss mitigation was the rare exception. A mortgage in loss mitigation for more than 90 days was not average. Generally, it meant the borrower was not fully engaged and cooperative. An unresolved mortgage deficiency lasting more than 120 days generally indicated the property owner was not able to work out the mortgage with the property owner’s lender. For this reason, the loss mitigation guidelines for most mortgages required the mortgage service company to initiate foreclosure action when a mortgage was more than 90 to 120 days delinquent.

After 2007
They call it the “mortgage meltdown”, “financial tsunami”, “global banking firestorm”. The current financial crisis has affected most every country in the world. It has had a dramatic impact on mortgage borrowers, mortgage loan owners and mortgage service companies. For the first time in recent history, mortgage borrowers and mortgage loan owners are confronting financial instability at the same time. Mortgage loan owners are working as diligently as mortgage borrowers to find a common solution. It has become clear to mortgage loan owners that their best interest aligned with the best interest of the mortgage borrower. Mortgage loan owners want mortgage borrowers to keep their property. The loan owners can no longer easily afford to take property and absorb the larger loss from a foreclosure.

Impact on Loss Mitigation
No longer a minimal department, loss mitigation had become high volume operation with thousands of fulltime employees. Many loss mitigation departments are open every day of the week. Some are open 24 hours every day. The volume of calls, messages, fax transmission and emails is staggering and growing. The growth approaches exponential proportions. For example, a large national mortgage service company with 300 employees in the loss mitigation department now employee 12,000 fulltime employees. It has 4 call centers in the United States and an overflow call center in India. It is averaging almost 20,000 fax messages every day. Their experience is typical for the mortgage service industry. Most people in the industry believe the growth trend will continue.

Processing Turnaround Times
What took days before 2007 began to take weeks by the end of 2008. A typical time to conclude a mortgage modification was 60 to 90 days. As the crisis deepened the processing turnaround time got longer. On March 4, 2009, President Obama announced The Making Home Affordable program to allow millions of Americans to restructure or refinance their mortgages, and may help keep many from losing their homes. He told Americans to call their mortgage service companies to find out if their mortgage would qualify for the program. Mortgage service companies were inundated with calls.

It has not been possible for mortgage service companies to hire and train people fast enough to minimally handle the loan. The result has been longer turnaround times supported by less experienced, reasonably unskilled and marginally informed employees. The burden has fallen on mortgage borrowers who typically experience:

• Uncooperative employees.
• Never speaking to the same person.
• Waiting long times on hold.
• Representatives who often give conflicting information.
• The fax messages and correspondence which is often lost and must be resent.
• Refusals to confirm agreements in writing even when requested to do so.

Confirming Communication
Many mortgage service companies lose correspondence. Generally, it is necessary to resubmit correspondence more than 50% of the time before receipt can be confirmed. It is now necessary to verbally confirm receipt by the mortgage service company for any correspondence sent to them. When speaking to an employee, it is important to confirm their statements with a second employee. More significantly, there is no assurance that correspondence received and confirmed on one day will not be lost the following week.

It is not uncommon for contracts to be lost.  Often, negotiators assigned to a file are reassigned before the file is completed. 

Many mortgage service companies presently operate in a state of management and operational dysfunction.