CUSTOM MADE LOAN MODIFICATIONS
Customizing workout plans for delinquent and defaulted borrowers is the best strategy for reducing the recidivism rate of mortgage workouts, according to Richard Faris, president of Ocwen Financial Corp.
In a article by Housing Wire, Faris said his servicing shop has succeeded in having lower redefault rates than Office of Thrift Supervision (OTS) and Office of the Comptroller of the Currency (OCC) because of these customized solutions. While the industry trends at around 50%, Faris said Ocwen’s redefault rates are between 20% and 30%, although he acknowledged that rate is still very high.
“We’ve worked on developing solutions that are optimized,” he told the audience.
Faris said creating a modification that provides the best return for the mortgage owner doesn’t necessarily mean setting up the maximum monthly payment the borrower can pay.
By giving the borrower a lower payment than what they can max afford reduces the risk of redefault and the net value to the investor may be greater, Faris said.
