DLS Servicing’s Donna Schmidt: For Many, Short Sales Represent the Most Graceful Foreclosure Option

Donna Schmidt is the managing director and founder of DLS Servicing Consultants, a provider of loss mitigation review and default servicing consulting services, training and technology for mortgage servicers.

A seasoned servicing professional with four decades of industry leadership, Schmidt is an authority on loss mitigation compliance. She is also the co-founder of WaterfallCalc, an online loss mitigation decision and calculation tool that enables servicers to streamline loss mitigation calculations while ensuring investor and regulatory compliance.

In today’s complex mortgage servicing landscape, the ultimate goal is not just to protect investors, but also to facilitate the best possible outcomes for borrowers. Fannie Mae’s recent training on this very topic underscores a vital aspect of this process–guiding delinquent borrowers through their options as effectively and gracefully as possible.

Fannie Mae’s initiative couldn’t be timelier. Over the past three years, streamlined approaches to home retention have enabled millions of distressed homeowners to keep their homes. Yet for many, they failed to address the root causes of financial distress.

The primary reason borrowers default is because they have excessive obligations. It’s no secret that wages have failed to keep pace with inflation, or that many Americans are leaning on credit simply to make ends meet. And while streamlined loss mitigation options have provided temporary relief, for some, it hasn’t been enough. In fact, in many cases, it’s created revolving door of assistance that can erode a borrower’s equity.

Unfortunately, the assistance spigot gets turned off at some point, and borrowers must confront the reality that they can no longer afford their home or current lifestyle, and “budget reckoning” takes place. When this happens, it’s up to servicers to analyze each borrower’s situation carefully and holistically before determining which path is the most realistic.

For borrowers who have already exhausted other avenues, a short sale often emerges as the most practical option. In most cases, a short sale allows borrowers to exit their mortgage obligations with dignity, avoid the stigma and long-term impacts of foreclosure and embark on a swifter path back to financial stability.

It’s crucial that servicers do not look at Fannie Mae’s guidelines as an operational hurdle, but as an opportunity to support the financial recovery of families who have found themselves swimming helplessly against financial tides. By providing the necessary support and interventions, we can truly make a difference in the lives of distressed borrowers, guiding them towards a more sustainable future.

(Views expressed in this article do not necessarily reflect policies of the Mortgage Bankers Association, nor do they connote an MBA endorsement of a specific company, product or service. MBA NewsLink welcomes your submissions. Inquiries can be sent to Editor Michael Tucker or Editorial Manager Anneliese Mahoney.)