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As a Servicer: Are You Strengthening Your Loss Mitigation?

As the amount of credit/debt is higher than ever in the United States and early stage/serious delinquency rates are increasing, pundits and experts across the industry have different views on the timing and how bad the crisis could be for lenders/banks, M. Allen's founder believes it's time to assess as we are in February of 23.

One of my most rewarding memories and jobs in three decades. I have enjoyed the opportunities to do many different things in my career thus far but the one I probably cheerish the most is the time helping consumers with their debt issues.

Those that were with me at Bear Stearns/EMC Mortgage can attest about the impact we made in the heat of the 09 financial crisis. The ability to sit down face-to-face and explain the options, learn what their challenges were and then be in a position to help them in their time of need is so so so powerful.

One of my recent quotes with a servicing executive: "why would we not use this time to assess where we are strong and where we have exposure?" "It's time to bring the right expertise to your team and conduct an unbiased assessment of the loss mitigation process."

Before I discuss the assessment framework, providing an introduction to my default operational leadership experience:

  • During the 2009 financial crisis, served as the SVP for top five U.S. Bank affiliate and responsible for the portfolio management of 14,000 real estate owned assets. This included leadership over 100 personnel and improving the total liquidation ratio while generating improvement in value recoveries.

  • As the Head of Default Strategy at a top rated Special Mortgage Servicer, launched the pilot development of the field loss mitigation unit. During this time, the team of 10 professionals saved over 1,500 customers from foreclosure during the six-month pilot. I personally went out in Socal on the weekends and knocked on thirty homes and helped over half of the borrowers get their loan situation resolved (prior to hiring my reps - wanted to prove the concept and ensure I knew what would work versus not work).

  • During our time at top rated mortgage servicer and affiliate of a Fortune 250 company, oversaw 160+ staff members across 3 global sites along with $80+BB non-prime servicing portfolio of 400,000 loans. Responsibilities included leading the loss mitigation, servicing analytics, and contact management and strategy organizations. Achieved $68.4MM improvement in losses mitigated by achieving 30+% increase in loan resolutions.

On that front, we're attaching an initial discussion guide and plan framework to use on a discovery call with you and your team. Please see the framework below:

Overall Objectives

Key Items In my first hundred days on the job or working with your team to make loss mitigation prepared for 2023-24, I would expect to:

• Introduce myself to the company and its stakeholders

• Communicate my expectations, and those of others, for the performance of the company and Default division

• Take steps to ensure that the core business is operating at its full potential

• Design the plan for future growth and profitability

• Communicate the plan for future growth and profitability to the stakeholders and team • Begin implementing the future plan

Intros and Communication Desired Information :

• Any information compiled on divisions' general industry and competitive position, specifically within Default Management

• Data on typical customer profile, loss profile, delinquency profile, economics, typical/target employee, center economics

• Company’s portfolio performance

• Company’s portfolio management inventory (project inventory)

• Budgets and capital expenditure information

• Background information on rationale for and status of relationships with investors/partners • Current organizational charts

• Biographies and evaluations/ratings of management team (direct reports down to supervisor/team lead level)

• List of top sub-service clients and profitability of each relationship

• Results of customer surveys and associate surveys (last three years)

• Servicing/Default’s current mission statement, operating principles, policy and procedures, etc.

Drive to full potential:

• Documentation on business direction, competitive assessments, operational assessments, goal setting, improvement initiatives, business planning and technology planning

• Budget forecasts, budget tracking, capital planning and funding for improvements

• Hiring and recruitment, training, quality assurance and monitoring, career path development for associate level, real-time resource management, workforce scheduling and forecasts, employee motivation

• Customer contact processes, work processes, administrative processes, policies and procedures (default specifically), business knowledge of associate base (resumes)

• Technology infrastructure (main systems, graphical user interfaces), web and email applications, desktop applications, support tools, reporting and data management applications, workforce management applications

• Details of employee/associate incentive plans and compensation

• Credit and portfolio management procedures, statistics and performance data

• Current strategic plans and operating plan documentation

Plan for the future

  • Redefinition of your company’s Default Mission/Objectives

  • Analysis of new solutions, services and partnerships

  • Formulation of new strategic and operating plans

Rationale here includes:

• Broaden thinking about the definition of your Default Servicing capabilities, competitive positioning and core competencies

• Compile new service, products and process capabilities – screen to prioritize

• Determine whether to leverage more strategic partnerships within Default

• Focus your Default on most leveraged opportunities, provide resource allocation framework, translate to budget, operating targets

Communicate the Plan & Execute

Action Items

  • Face to face meetings with top level management, direct reports, staff, largest investor clients, partners and other stakeholders

  • Communication of new company Default direction, structure, strategies and initiatives Begin to execute

Estimated Timeline:

Strategy Model:

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