Capco Unveils New Report Analyzing Current and Future Risks to Investors, Lenders and Servicers

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Report Details Loss Mitigation Initiatives in an Era of Strategic Defaulters

Capco, the global provider of consulting and managed services to the financial services industry, has published a new report that gives investors, lenders and mortgage servicers strategic advice on mitigating losses from a variety of risks — especially those that are being triggered by “strategic defaulters.”

The report, entitled, “The Real Problem in the Housing Crisis: Who’s Going to Blink First, Banker or Borrower?” analyzes the current residential real estate market and ongoing mortgage crisis and offers detailed steps for uncovering, confronting, and mitigating ongoing and upcoming risks while creating new business value and opportunity at the same time.

With the evaporation of some $7 trillion in homeowner equity over the past three years, it is becoming increasingly clear that banks and homeowners will still have difficult decisions to make in a market that will not rapidly return to the real estate valuations that were prevalent in the years leading up to the financial crisis.

  •     Many homeowners — even those with good credit and the ability to afford their current mortgages — are questioning whether to continue making payments on investments that will not regain the value they thought they had purchased when the homes were acquired. These are the so-called “strategic defaulters.”
  •     Banks, on the other hand, have been wrestling with how to develop rational loss mitigation strategies — for instance by considering options from the broad spectrum of loan-modification arrangements. This is an especially tricky issue because it is very difficult for banks to determine who the strategic defaulters are, and how prevalent such defaulters may be in their real-estate portfolios.

Capco believes banks must move aggressively to uncover, confront and mitigate risks and consider meeting borrowers halfway — so as to preserve loan performance by keeping them in their homes. The report details a set of recommendations that will help organizations better position mortgage assets based on predicted loan performance and borrower behavior. These recommendations include:

  •     Sharpen your analytics: More sophisticated and precise analytics can help organizations uncover potential strategic defaulters and other significant hidden risks.
  •     Get the right data: Develop mechanisms for culling the most relevant from within an organization and from third parties; create an effective way to assimilate that data.
  •     Use technology to scale processes: Develop a more robust and scalable technology foundation and consider technology an important strategic enabler in loss mitigation.
  •     Get it right the first time: Leverage the more sophisticated and accurate analytics and data to develop proactive strategies that create both risk management and strategic business value; reach out to borrowers and execute these strategies with urgency.

The report is available now at http://www.capco.com.

About Capco

Capco is a leading global provider of integrated consulting, technology and transformation services dedicated solely to the financial services industry. Our professionals combine innovative thinking with our unrivaled firsthand industry knowledge to offer our clients consulting expertise, complex technology and package integration, and managed services to move their organizations forward. Through our collaborative and efficient approach, we help our clients successfully increase revenue, manage risk and regulatory change, reduce costs and enhance control. In North America, we specialize in banking; capital markets; wealth and investment management; finance, risk & compliance, and technology with offices in Chicago, D.C., New York, San Francisco and Toronto. To learn more, contact us at + 1-212-284-8600 (+32 3 740 10 00 from outside the United States or Canada), or visit our Web site at http://www.capco.com.

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Lane Cooper

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