Monday, June 13, 2011

A New Way to Predict Default

Sperlonga Data and Analytics of Arlington, Virginia, is offering a new service designed to help mortgage servicers reduce their risk on loan modifications by alerting lenders that a borrower is falling behind on their homeowners association (HOA) fees. The company is a subsidiary of national real estate asset firm MMREM.

Unpaid HOA fees, a clear sign of potential mortgage defaults, have historically been very difficult for lenders and servicers to track, according to the company. With this new service, lenders can now identify potential defaults or troubled modifications months before the borrower actually misses a mortgage payment.

It's not clear to me what action a servicer could take months before a borrower actually missed a mortgage payment or what personnel they'd use to do it, but technology could be deployed to moved these borrowers into a queue that would get more attention should they call in for modification or short sale information.

This might be particularly effective during the summer because if they're not paying HOA fees, they're not getting access to the pool.

“In the majority of the cases, borrowers will stop paying their HOA fees before they stop making their mortgage payment,” said Matt Martin, Sperlonga’s chairman and CEO of MMREM. “Knowledge that a borrower is late or delinquent on HOA fees will allow servicers to get in front of a loan that’s about to default, and in the case of loan mods, it can be even more critical to minimize losses.”

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