Web Portal to Speed up Repossessed Homes Program

A web portal to process loan modifications under the repossessed homes program has been proposed by Jack Guttentag, finance professor emeritus at the University of Pennsylvania.

Guttentag said that a web portal could be accessed by lenders, borrowers and certified counselors. The portal provides information to borrowers on what they should do and what they should submit to apply for loan modifications. With advice and assistance from counselors, borrowers will complete the application forms and submit their applications online.

Through a system, the applications would automatically alert the lender and create a new file for the new borrower applicant. Through this file system, subsequent communications between the lender and the borrower and the counselor will be recorded and updated.

Under the current repo homes program, many borrowers are not being responded to because of lack of lender personnel and failure to upgrade computer systems. There had been many cases of lost modification applications and lack of follow-up. Lenders have simply been overwhelmed by the onrush of borrowers wanting to apply under the repossessed homes program.

But compared to the goal of helping up to 9 million troubled American homeowners, the pace of progress is too slow.

Joseph Smith, head of Default Mitigation Management LLC, said modifying a home loan is not complicated. If all the needed modification documents are ready, a loan modification can be completed in 45 minutes to one hour. Smith has been modifying home loans for several years.

Smith said the loan modification process includes evaluating the borrower’s budget and income, completing the modification worksheet and making a forbearance plan.

Smith explained the low rate of loan modifications under the repossessed homes program as due to the overwhelming number of applications. He added that the systems of banks were not designed to process hundreds or thousands of loan modification cases in one day.

Even if banks hired more personnel, their systems are not ready for multiple loan modification applications. According to Smith, lenders and servicers lack systems for receiving and processing a lot of phone calls and for tracking files and mail documents.

Guttentag said the proposed web portal is feasible because Default Mitigation Management has been using a web portal to modify loans. According to him, the web portal is currently being used by lawyers working out loan modifications with servicers.

Since the success of the repossessed homes program depends largely on the number of loan modifications accomplished, the web portal strategy should be given a serious consideration.

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