Select Portfolio Services Loss Mitigation Works

Former black sheep loan servicer, Select Portfolio Services (SPS), is far ahead of the pack on home loan loss mitigation. I previously wrote about the reception I received when I called SPS about a troubled loan. My client was behind on payments by about 12 months and had not paid the property tax for more than a year. The loan had an adjustable interest rate and had ratcheted up to 11.7% There was equity in the home but the client could not put together enough money to bring the loan current.

SPS agreed to reduce the interest rate and fix it at 8% for the remainder of the loan term. Even more important for my client, they agreed to add the defaulted payments and foreclosure costs to the loan prinicpal and allow the resumption of payments at the new rate bringing the loan current. While I am not delighted with the manner in which this agreement was documented, my client went from days away from foreclosure to a current status on the loan with a single monthly payment.

After an entire day of presentations and discussion yesterday at the National Association of Chapter Thirteen Trustees (NACTT) annual convention in San Francisco, it was obvious that no clear path is available with most loan servicers for loan default remediation. My experiences with loan servicers has ranged from the above very satisfactory result with SPS to an hour or more on hold before being told that loan modifiation would not be possible as a solution to the default.

Bay area bankruptcy lawyer extrordinaire Cathy Moran talks about a successful loan modification proposal for one of her clients in a recent article. While she reports that a release of rights was required by the lender for her client, I am pleased to say my client was not forced to give up any rights in order to get the loan modification. The client did agree to the balance due (including fees and costs associated with the foreclosure) but the fees seemed reasonable and were more than offset by the annual difference in interest rate accrual.