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Issues across the mortgage value chain have manifested in lower profitability in the industry. The average return on average equity (ROAE) for the top four mortgage lenders in the U.S. has dropped from a high of 16.94% in 2006 to 7.34% in 2011. —Deloitte Center for Financial Services organization is the very thing that helps keep them from defaulting. Step Three: Assessing the Situation Once contact has been made with the borrower and a rapport has been established, it's imperative to determine if the borrower is able, and equally as important, willing to make regular payments in order to rehabilitate the loan. In essence, the servicer must find out how cooperative the borrower will be in working toward the best possible financial outcome for everyone. From there, the next obvious step is finding out whether they qualify for a loan modification program—government or otherwise. They need to know what their options are and be guided toward appropriate solutions that could make home retention less of a struggle. Step Four: Employing the Right Tool For borrowers who meet eligibility requirements and show a willingness to make their payments on time, the government's Home Affordable Modification Program (HAMP) as well as proprietary loan modifications for borrowers who don't qualify for HAMP can often make homeownership both affordable and sustainable. In cases where borrowers are unable to qualify for loan modification programs, the next best thing a servicer can do to minimize loss is to assist the borrower in successfully transitioning into either a short sale or a deed-in-lieu of foreclosure. While these options might not seem ideal from the borrower's perspective, for some they offer the best resolution possible given the circumstances at hand. Short sales typically release the borrower from being responsible for the amount of the delinquency, while a deed-in-lieu takes less time to complete than a foreclosure. So in both cases, the borrower can get out from under a mortgage they simply cannot afford sooner. 50 For every distressed loan a servicer comes across, there is a unique story. Taking the time to figure out what that story is and using that information to best meet the needs of the borrower can make a huge impact on whatever happens next— and how it will ultimately affect your bottom line. Coming Full Circle By Steve Campbell and Fred Zakula, ProVest During the past several decades, our industry has created, innovated, adapted, and applied a vast array of technological improvements largely in the name of scale. The technology implemented may have actually become an Achilles heel during the most recent economic turndown. Technology was built to streamline and optimize back office processes whereas today what we arguably require is a closer, more intimate understanding of homeowners in default. We need to get back to face-to-face contact. Online workflow was the enabling core innovation introduced by these systems. This allowed companies to partition and assign default and loss mitigation duties in a more efficient manner. It enabled the industry to drive greater specialization and more targeted work distribution into back offices. Shortly after, these new workflow capabilities were enhanced through the integration of advanced telephone capabilities including predictive outbound dialing and sophisticated inbound call handling. Each of these technological innovations enabled meaningful improvements in productivity and effectiveness. These new efficiencies allowed financial services enterprises to drive toward scale, while organically growing and inorganically amassing portfolios of the size the industry had not seen. As this metamorphosis began to take place, it was turbocharged by the application of advanced mathematical techniques. Businesses began to create and apply custom behavioral score cards, mathematical models that predicted a variety of customer behaviors and enabled businesses to focus more on customer segments versus individuals themselves. As the industry experienced the success of scale, we started to lose the intimacy of one-on-one relationships. The financial services industry began to see the introduction of these transformational technologies nearly 30 years ago. These advancements have fundamentally changed the nature of the relationship service providers have with homeowners. We have moved from highly manual and often paper-based business processes to ones that are highly driven by information technology. As these systems came to life, our default management and loss mitigation lives were transformed. Facing Challenges While there is no denying that technology has greatly enhanced our processes, the ability to manage relationships, particularly those between a financially-challenged homeowner and his or her lender, suffered as a result. There is a general distrust by the public at large that sophisticated computer-driven call campaigns and mass-produced correspondence are rooted in a misplaced conviction that foreclosure is the desired outcome. As the global economic downturn gained momentum, customers' phones began to go unanswered and mail piled up unopened. Part of the challenge that needs to be addressed is actually locating the homeowner. The letter running and centralized call-center-based techniques for communicating with a borrower have simply proven to be less effective for those deeply in debt. However, today we can leverage our robust computing platforms to actually track down the borrower and ensure the person attempting to reach the homeowner is knocking on the right door. Once in front of the homeowner, the agent can explain that the visit is intended to identify ways to resolve the delinquency through one of the many programs that may be available. Locating the homeowner is the first crucial step in this effort. Finding the Right Balance The lesson to be learned is that while technology has brought efficiency and productivity to the industry, our default management and loss mitigation efforts today require a deeper conversation with homeowners. The industry can be even more successful by addressing the need for empathic listening that can only come from meeting the customer face-to-face. Now, through the creative use of information technology, someone can be dispatched to

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