“Servicers are just not equipped to do this,” said William Kelvie, the chief executive of Overture Technologies, a company that sells underwriting software. If you want to understand why loan modifications have been so slow in coming, that’s a pretty good place to start.
For most of its history, the mortgage servicing industry — which is dominated by big banks like Bank of America, Wells Fargo, and JPMorgan Chase — did relatively simple tasks: it collected mortgage payments, paid taxes on the properties and so on. Yes, it dealt with borrowers who were in arrears — which usually amounted to no more than 2 or 3 percent of their portfolio at any one time — but mainly it either prodded people to get current on their payments or initiated foreclosure proceedings.
Modifying loans — thousands upon thousands of loans, amounting to as much as 25 percent of a servicer’s portfolio — is a much more complex task. For some servicers, the sheer numbers can “overwhelm the system,” said Larry B. Litton Jr., the chief executive of Litton Loan Servicing, which is owned by Goldman Sachs and which has long specialized in loan modifications. That is at least part of the reason why borrowers are having so much trouble getting their servicers to take their calls: many servicers can’t cope with the volume.
More important, loan modification requires a lot of work. They can’t be done in a blanket, one-size-fits-all fashion. Rather, loan modification is a one-on-one process that requires servicers to do something that should have been done in the first place: actually underwrite the loan.
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