Mortgage Industry Trends

A lenders worst nightmare is the thought of opening the mail one day
to find an investor repurchase notice, coupled with a demand to cure or
make whole. Depending on the number of loans on the accompanying list, a
notice can create serious economic hardship, as well as tremendous stress
at all levels of an operation.

Having attended many conferences over the past year, where the topic of
defaults, repurchases, and mortgage fraud are as hot as fish grease on a
warm day in July, I nevertheless come away surprised at the so-called
experts advice. Almost to a speaker the advice doled out at conference
after conference is to delay, distract, and basically tell your investors
to pound sand. The strategy I assume, if one can call ignoring a
serious problem a strategy, is to delay the financial consequences as long
as possible and hope for some negotiated compromise later.

The problem with this advice is that it is risky and dangerous, and by
advocating an avoidance of issues, eliminates the opportunity to cure
defaults and dispose of defective loans in an orderly, controlled way.
The advice also flies in the face of reality where lenders are selling
loans to their warehouse banks, risking the loss of lines, and where
aggressive investors will engage in their own loss mitigation, without a
care about the financial consequences, knowing that in the end they can
enforce their purchase agreements by lawsuit if necessary. What ends up
happening is that lenders find themselves well past the time to engage in
their own, self-interested loss mitigation, and instead are stuck with
make whole demands that tax their cash and their resources.

Time is critical to loss mitigation. Having the ability to control your
own financial destiny is also important. Lenders must act immediately
upon notice of an EPD and/or repurchase to either fight the demand, in the
context of their legal rights under the agreements, or based upon a
thorough forensic examination of the alleged loan defects, craft a
comprehensive loss mitigation strategy that will get the kind of results
that benefit lenders, and not merely their investors interests.

In actuality, a well-planned and timely loss mitigation strategy benefits
both lenders and their investors since both have financial interests at
stake. Contacting borrowers, realtors, settlement agents, appraisers, and
other interested parties early gets them all involved in the matter.
Bringing in the loan officer to resurrect their borrower relationship also
helps. Identifying problem areas, and their sources for damage loss, such
as closing protection letters, title underwriters, professional liability
carriers, and appraisers E & O insurers, and putting them on timely notice
of potential claims, is critical.

In many instances, educating the borrower about a loan defect and
providing good faith advice in curing the defect results in high levels of
cooperation, and ultimately, an acceptable; resolution of the problem.

While lenders may not have the trained resources to conduct an unbiased,
comprehensive repurchase defense and loss mitigation effort, there are
trained professionals who specialize in these areas to assist in the
effort. Lenders should be encouraged to seek outside help, and outsource
their loss mitigation issues, to be handled confidentially, professionally
and in a timely manner. Investors appreciate the commitment towards a
resolution through the use of outside professionals, and are usually less
confrontational and much more cooperative in the process.

The next time an investor comes knocking, close the shades and hide under
the couch. Pick up the phone and get qualified assistance immediately. In
the final analysis it is your best defense to the burgeoning repurchase
problem in our industry.

Andrew Liput has over 20 years experience as a corporate and banking
attorney. He most recently served as Senior Vice President and General
Counsel to a large regional mortgage lender. As an owner of New Jersey
based Repurchase Resolution Specialists, Inc., he and his mortgage
industry staff manage loss mitigation efforts, including close cooperation
in investors, for lenders nationwide. For more information on RRS, visit
www.RepurchaseSpecialists.com