Communication Problems Between Collection & Loss-Mitigation Departments Cause Impediments For Homeowners Facing Foreclosure

A recent column by syndicated real estate columnist Kenneth Harney highlights the impediments that financially strapped homeowners run into when trying to work out a payment plan on home mortgages in default with their lender.

• Listen to real estate attorney Nancy Gusman of Largo, Md., who represents financially distressed homeowners seeking ways to avoid foreclosure: "It's insane," she said in an interview. "(Mortgage) servicers tell everybody, 'Call us as soon as you have problems making the monthly payment.' But then the borrowers call and are told, 'Oh no, we can't talk to you about a loan modification. Your file is in the collections department (not the loss-mitigation department where loan modifications and short sales are handled) because you're only 30 days late.'"

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• Robert Padgett, director of nonperforming loan servicing for mortgage investor Freddie Mac, says mishandling of troubled accounts between collection departments and loss-mitigation and workout departments is "a problem. The collection folks are trained to recognize loss-mitigation (loan modification) opportunities early" in the process, and are supposed to push them through quickly to the specialists who can custom-craft workout solutions. But clearly that doesn't always happen.

For more, see:

• Loan industry unable to 'help' quickly enough, or
• Borrowers Seeking Help May Feel Lost at Sea, for the same story.