Loan Modification Underwriting Process
ATTENTION LENDERS - As The Economy Improves Don't Forget To Shift Gears!
A lot of water has passed under the bridge since capital markets began to unravel in the USA nearly 6 years ago. As a surviving lender, you have been traveling this bumpy road for far too long. Staying afloat during these unprecedented times takes a great amount of fortitude and innovation. Congratulations!
Now as light begins to appear at the end of the economic tunnel, you might be tempted to relax and stick with the status quo when it comes to your mortgage loan default management and underwriting procedures. As the quality of your loan portfolio steadily improves and the value of your assets builds, it may become easier to ignore those defaulting loans and non-performing assets. So, stay on your toes and prepare to shift gears for the rebound!
Loan Modification Underwriting Process at Outsource2india
A professional contracted mortgage servicer can provide your company with experienced loan modification underwriters who are capable of rapidly evaluating loan modification requests. They can also efficiently expedite modification approvals with strict attention given to the adherence of your institutions modification standards, policies, procedures and loss mitigation goals as well complying with the applicable HAMP, Feddie Mac or Fannie Mae loan modification guidelines.
- When a request for a loan modification is received from the borrower, the loan modification underwriter can help to facilitate the collection of all pertinent documentation.
- The loan modification underwriter will analyze and review the particular circumstances which justify a loan modification.
- The underwriter will evaluate and assess the borrower's financial status, current income and asset situation and ability to pay.
- Using an updated appraisal report the modification underwriter will confirm the current market value of the property as security for the loan.
- The loan modification underwriter can ferret out any fraud issues if they exist and determine the borrower's eligibility for various types of modification programs.
NPV Test Compliance
The loan modification underwriter can utilize the net present value (NPV) test. The NPV test will compare the net present value of cash flows with and without the loan modification. If the NPV test indicates a positive benefit for the lender, a modification approval can be recommended.
Proper Modification Sequence
As part of the modification underwriting process, the modification underwriter will use accepted methods to reduce the borrower's monthly payments to no more than 31% of the borrower's gross monthly income (DTI). The modified terms typically start by reducing the interest rate first then if further payment reduction is necessary, the amortization period may be extended to a maximum of 40 years. Finally, principal reduction may be considered as a last resort if deemed prudent. The overall goal of the loan modification is to lower the borrower's monthly payment to an amount that is expected to be sustainable for the borrower for the remainder of the loan term.
Remain Flexible and Agile
If you are like most lenders, as defaults diminish, it's time to start scaling down and dismantling your loss mitigation structure (if you haven't already done so). Your once-critical default management personnel can now be repositioned to handle the increasing book of new business which is coming down the pike.
This Is the Time When Outsourcing Can Really Make Sense
In many areas of the country, the economic recovery has been slow and sporadic. Markets which were hit worst continue to struggle. In this time of transition, it's not always easy to forecast future defaults accurately. Rising markets serve to reverse defaults while static markets may cause an increase in defaults. This is when outsourcing your loss mitigation activities to reliable mortgage outsourcing companies like Outsource2india can really make a difference.
By contracting with a professional loss mitigation servicer you can more easily scale available resources to fit your needs. Outsourcing will allow your firm to completely dismantle your existing loss mitigation structure by replacing it with a flexible lower cost alternative. Outsourcing loss mitigation tasks such as your loan modification underwriting process will allow your company to slim down to a 'skeleton crew' while increasing productivity and reduce expenses.
Streamline Your Loss Mitigation Operation Today!
Outsourcing loss mitigation activities will help to streamline all of your loss mitigation functions. In addition to helping with your loan modification underwriting, we can help to streamline collection calls, foreclosure, and deed in lieu processing as well as short sale negotiations. Get in touch with our executives today!