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Originators are direct beneficiaries of what component and special servicers can bring to short sales, but they’re not alone. Realtors and borrowers can benefit, as well. Incoming borrowers save money, and the individuals who are selling their properties are allowed to exit the troubled transaction with far less credit damage. This in turn means that those sellers can be originators’ customers two years to five years sooner than if they had gone through a foreclosure.
In the broader picture, the market itself also benefits when homes are prevented from going dark. Neighborhood prices can suffer greatly from foreclosed or vacant properties, which subsequently can depress sales even more and limit loan opportunities. The growing prevalence of component servicers thus is benefiting brokers and originators on the level of the customer and on the level of the market as a whole.
Another important way that component servicers help loan originators can be summarized by looking at recent history. At some point, the housing crisis switched from being a crisis of credit to a crisis of confidence, and that’s where we find ourselves today. Demand is dwindling not because there’s a shortage of money to lend or because rates are too high, but because confidence is missing. There is an amalgam of economic factors preventing investors from easing credit requirements and inhibiting consumers from acting.
The component-servicing sector can’t solve these problems alone, but the sector is helping — perhaps more than some people realize. From the investors’ point of view, component servicers are having great success in working with borrowers to keep them in their homes or find foreclosure alternatives such as accelerated short sales.
By delivering greater results and reducing loss severities, these servicers also are bringing increased confidence to the mortgage market as a whole, as evidenced by recent interest in private mortgage-backed securities. Investor confidence is an essential tributary to support the waterfall effect that the housing industry has on the national economy, particularly employment.
A little confidence, in other words, goes a long way. As businesses begin to invest by ordering goods and employing more individuals, ripples are being felt along the economic chain, fueling consumer confidence.
As consumers become more confident, the housing market feels the benefits and the cascade effect continues. In short, special servicers help get the ball moving, providing an impetus that neutralizes some of the negative factors that have stalled the economy’s recovery, such as foreclosure statistics.
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From one end of the lending spectrum to the other, the livelihoods of mortgage professionals have never been more dependent on each other. While originators work to create more loans, servicers do their part to keep those transactions out of the grave.
With new lending and brokering opportunities springing from the work that special servicers do, the alliance between these sectors is more apparent than ever. As customers count on brokers and originators to help them understand the process of acquiring a home, they can count on component servicers if and when they find themselves in unforeseen trouble.
Ed Delgado is chief operating officer of Wingspan Portfolio Advisors, a Dallas-based diversified servicing company working with banks, investors, mortgage insurers and real estate agents throughout the U.S.
Formerly CEO of the Five Star Institute, senior vice president of Wells Fargo and an executive at Freddie Mac, Delgado has more than 20 years of experience in mortgage banking and is recognized as a leader and innovator in the industry. Visit WingspanPortfolioAdvisors.com. Reach Delgado at Ed.Delgado@wingspanadvisors.com.
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