Sponsored Content from Boston National Title: A Better Title Solution for Increased Default Volume
By Nathan Bossers, President, Boston National Title
Don’t say 2008. Yet.
Yes, more than 117,000 properties started the foreclosure process in the first half of 2022 – up 219% compared to last year – but we’re still well below historic levels.
And yes, REOs are up 30%, but they’re 1/10th the number of the cataclysm that was 2009 and 2010.
And yes, plenty of conditions are different in 2022, but there’s no denying some of the comparisons to the last downturn: most notably, 2008’s 225% spike in foreclosure starts.
Simple market correction or an engine failure at 37,000 feet?
Borrowers are in a much better financial position than in 2008, and most of the loans that foreclosed then were the infamous subprime loans. Since then, CFPB regulations have significantly tightened borrower qualification requirements.
Homeowners also have longer timelines to modify their loans and ride out any downturn in the economy. At the height of the Great Recession in 2010, the average time to complete a foreclosure was 250 days. In 2022, that number is 948 days.
Again, so many factors are at play globally that predicting what happens next is a fool’s errand. But one thing’s for certain: Servicers will deal with significant default volume for the foreseeable future.
And that presents its own series of challenges, especially when it comes to the default title workflow. The process of managing default properties to reperformance is an expensive one. Speed is of the essence to minimize carrying costs such as property maintenance, utilities, and taxes.
Reducing wasteful title and settlement costs during default
At Boston National Title, we lived through the 2008 crisis. We saw one large, national servicer order – and reorder – title up to seven times as a file bumped its way from early stage default through REO and foreclosure. Seriously. Up to seven times.
Every challenge or problem is a solution waiting to be born. What could a title agency do to help mitigate the cost of default loans on the bottom line? How could the process be reimagined to eliminate unnecessary title requests while speeding these loans through to disposition?
End-to-end default title life cycle management
The premise behind an end-to-end default title solution is simple: When the same default title team manages a file from early stage default through resolution, they become very familiar with its title and settlement status and needs.
This means: No starting from scratch on title as the file enters the next phase. No hand-offs and time wasted having to bring a new team up to speed. Clear, consistent communication among all title-related parties throughout the file’s life cycle.
At contract receipt, a team lead immediately reaches out to all parties, reviews the timeline necessary to support the contract period, and works to ensure prompt preparation and delivery of documentation.
And in the case of REO sales, having the same team manage the file from the beginning ensures there are no surprises during the contract period, as it relates to the condition of title.
An expanded role for technology during loss mitigation
Fast decisions are the key to expediting loan modifications. For example, at the loan modification stage, instead of a lender’s team performing several days of pre-underwriting and then waiting several more days for a decision, imagine the title agency’s instant decisioning engine delivered trustworthy results that support MMP requirements in a matter of seconds.
The results speak for themselves
Back to the large, national servicer that was ordering title up to seven times on one file. That number is now one, with title updates (or bringdowns) along the way. In addition, the curative cycle during the REO sale has virtually been eliminated because the work is done before and at foreclosure.
While an end-to-end default services solution could benefit all servicers, it’s important to note that no two are alike. Any default title and settlement services workflow under consideration needs to flex with different servicers’ different processes and requirements. Equally important, the solution must be implementable without disruption to the existing workstream.
If there are any silver linings to what happened in 2008, it’s that borrowers have more time and tools at their disposal to prevent foreclosures. And when a default does happen, servicers have smarter, faster processes to get those properties performing again.
In other words, while no one knows exactly what the next 12–18 months will look like, everyone can be better prepared to deal with default.
(Sponsored content includes material submitted independently of the Mortgage Bankers Association and MBA NewsLink and does not connote an MBA endorsement of a specific company, product or service. For more information about sponsored content opportunities, contact Bill Farmakis at bill@jlfarmakis.com or 203/834-8832.)
