The secret behind the success of mortgage incentive strategies points less toward traditional loss-mitigation and recovery methodologies and more toward an approach that carefully combines consumer behavior and incentive theory.
Rumson, NJ (PRWEB) September 12, 2011
The strategic default crisis may worsen due to a lack of connectivity with homeowners, according to Loan Value Group. In the September 2011 issue of Mortgage Banking Magazine, in an article entitled Getting Borrowers’ Attention (http://www.loanvaluegroup.com/pdfs/sept2011_mortgagebankingmagazine.pdf), LVG’s Frank Pallotta and Tyrone Canaday, provide their views on the importance of connecting with homeowners and the use of incentive-based solutions to address the increasing number of mortgage defaults.
Because there is little focus on loss mitigation for current-pay loans – as the servicer sees no need to contact these homeowners – the associated contact data gets stale and the direct connection to the homeowner becomes lost. “Everyone knows homeowners are becoming frustrated, but increasingly the mortgage industry has no reliable way of knowing when frustration turns into default until mortgage payments stop coming…and then it’s too late,” said Pallotta.
Incentive-based programs are beginning to gain momentum as an inexpensive and effective way to proactively address strategic default. LVG’s Responsible Homeowner Reward® (RH Reward®) program, launched in January 2010, is an example of how connecting with homeowners and offering incentives can reduce the risk of default. To date, LVG has lowered overall delinquency rates by as much as 50% on 1st and 2nd lien mortgages. Additionally, the Program has shortened resolution timelines by as much as 75%.
In the article, Canaday states that the secret behind the success of mortgage incentive strategies points less toward traditional loss-mitigation and recovery methodologies and more toward an approach that carefully combines consumer behavior and incentive theory. He added, “A traditional carrot-and-stick strategy will not suffice in the current housing situation. Banks and servicers need to be open to new ideas and not just the status quo.”
The benefits that come from having a reliable connection with homeowners are now becoming clear. Not only are risk owners able to more quickly address delinquencies, they also have the ability to obtain real-time information directly from the homeowner. “Financial institutions are beginning to scratch the surface in realizing the power of homeowner connectivity and how useful this information can be in shaping the future of mortgage banking,” said Pallotta.
For more information on how the Responsible Homeowner Reward program works, please visit http://www.RHReward.com.
About Loan Value Group LLC
Founded in 2008, Loan Value Group LLC (@LoanValueGroup) is a mortgage solutions provider of a large-scale, low-cost, turn-key platform that positively influences consumer behavior on behalf of residential mortgage owners and servicers. Based in Rumson, NJ, LVG provides owners of risk with a solution that directly addresses strategic default through the use of incentives. LVG is the exclusive provider of the Responsible Homeowner Reward® (RH Reward®) program, named one of the “50 Best Inventions of 2010” by Time Magazine. Institutions can learn more by contacting Frank Pallotta or visiting http://www.loanvaluegroup.com/. Consumers can learn more by visiting http://www.rhreward.com/.
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