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» VISIT US ONLINE @ DSNEWS.COM COVER STORY COVER STORY INDUSTRY INSIGHT It's a different industry today—from new consumer protections to procedural checks and balances, business as usual is anything but ordinary. T Customer Centricity One of those industry-wide improvements, according to Colleen Hernandez, president of the Homeownership Preservation Foundation, is that "the consumer experience is now front-and-center for everyone." "When delinquencies started rising and we realized the old 'no-touch'-'low-touch' system wasn't going to work, we went into emergency crisis mode to figure out how to deal with it," Hernandez said. "Over time that's evolved into a system where the consumer experience is much more front-and-center." Hernandez says in May, she witnessed an audit taking place at a large servicer, in which eight Consumer Financial Protection Bureau (CFPB) examiners were on site. "Every day, the question was asked: How will the consumer perceive this transaction? This communication, this letter, this decision—how will the consumer perceive it?" Hernandez says while that's evidence of the regulatory emphasis on the consumer experience, there's more to it for servicers than just compliance. It's more about trying to really understand what causes the consumer to reach out for help or not reach out for help; to complete a modification application or not complete it; or to successfully sustain their mortgage over time. "There's now a real strong emphasis on who the consumer is, what makes them tick, and what kind of servicing fits their needs. … Everybody wants homeownership to succeed," Hernandez said. Hernandez also says the industry has reached the conclusion that you can't just focus on the mortgage. In order to ensure mortgages are sustainable, consumers' total financial pictures must come into play, she says. How much house can they afford? How much debt do they have? Those are questions that now come up in the earliest stages of interactions with borrowers. Hernandez says there's an acknowledgement that the mortgage is only part of a consumer's total life—and that's a new vantage point for lenders, investors, counselors, and consumers alike. She says it's a "big shift" that she considers very positive for the industry as a whole. Hernandez also notes that there's a lot more standardization in terms of borrower assistance. That's the legacy of the government's Making Home Affordable program, she says. Mods are standardized, waterfall, timing, protocol, even definitions of terms—they're all standard across the industry now, Hernandez says. "Another important thing that's come from the Making Home Affordable program," Hernandez added, "is that things aren't always going to go smoothly, and now there's a standard process for escalation and working with the servicer to make sure there's a proper resolution." POINT— COUNTERPOINT But the housing finance industry in the United States, and default servicing especially, has changed. From a slew of new regulatory mandates and new overseeing agencies to an altered public perception of debt obligations, for professionals dealing with delinquent borrowers and distressed assets, business has evolved into something far from customary. Richard M. Rothfuss, managing partner of Lerner Sampson & Rothfuss, says with all the changes the industry has endured over the past few years, default servicing professionals have learned to adapt. "The industry is more receptive to change and focused and mobilized like never before on overall improvement," Rothfuss said. MARKET PULSE he veterans of this business can remember when market conditions were "normal"—when REOs ran in the neighborhood of 150,000 a year, delinquency rates were just around 4 percent, and you only needed a credit score of 620 to qualify for a prime mortgage loan. Patchwork of Mandates The Making Home Affordable program is just one of many rulebooks the industry now follows faithfully. Between federal, state, and local governments; agency and non-agency investors; and court rulings, consent orders, and settlements, there's certainly no shortage of new statutes and standards to abide by—and staying compliant is paramount, from the lender and mortgage servicer, all the way down to the title agent and property appraiser. In 83

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