Tuesday, September 11, 2012

New servicing brings principal reductions

by Ethan Handelman, National Housing Conference

As servicing migrates to those able to handle the challenge of underwater and troubled loans, it is becoming clearer that principal reductions are an essential tool for helping homeowners, improving returns to lenders, and thereby preventing further foreclosures that destabilize neighborhoods. HousingWire’s latest article on Ocwen Financial Corp. points to a sharp uptick in principal reductions in the three months since Ocwen took over the Saxon Mortgage Services portfolio.

Shared appreciation mortgages are one of the tools Ocwen has pioneered for resolving underwater loans. Despite strong early results, others have been slow to adopt the shared appreciation model. Indeed, the Federal Housing Finance Agency has largely ignored it in the debate on principal reduction.

Ocwen is a member of NHC’s Leadership Circle. Paul Koches, general counsel for Ocwen, spoke about their servicing innovations at NHC’s 2012 Policy Symposium.

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