Online system streamlines mortgage modification

During the height of the real estate bubble in the early 2000s, it was remarkably easy to get a loan: Go online, fill out an application, and you were well on your way to homeownership.

But as some of those homeowners defaulted on their mortgages, the same technology wasn't applied to loan-modification, or "workout," efforts that could help keep them in their homes, advocates for the borrowers complained.

That could change.

An industry group with an executive at the Philadelphia mortgage insurer Radian Group Inc. in a leading role has developed an online system to streamline the loan-modification process by using a method that gives servicers, investors, mortgage insurers, and housing counselors a common platform and repository for documents.

"The idea is to make it the industry highway for workouts," Cam Melchiorre, senior vice president of loss management at Radian, said of the system, called Hope LoanPort.

Melchiorre, chairman of the technology steering committee at HopeNow, a group that has been coordinating industry efforts to combat foreclosures, said LoanPort was similar to LendingTree in that it provided a standard for all players.

LoanPort chief executive Larry Gilmore said Melchiorre, with his effort to use technology to simplify the modification process, was "a significant asset to the creation of Hope LoanPort."

A pilot program started in January with six mortgage servicers, keeping volume light, but momentum appears to be building. Citigroup Inc., among the nation's 10 largest mortgage servicers, is the latest to agree to use the system, Hope LoanPort announced Wednesday.

Residential Capital L.L.C., a Fort Washington mortgage arm of Ally Financial, formerly GMAC Financial Services, has used LoanPort from the beginning but has seen only 20 or so loan-modification packages come through, though their quality has been solid, spokesman Jim Olecki said. "We look forward to more counselors and servicers getting aboard so it gets more volume around the product," Olecki said.

In Philadelphia, the Consumer Credit Counseling Service of the Delaware Valley plans to start using LoanPort next month, pending completion of a link from its own software, president Patricia A. Hasson said.

A huge issue for housing counselors is the disappearance of tax forms and other documents. "Right now it kind of goes into a black hole with servicers," said Anthony A. Orman, vice president of client programs at the local group, which employs 46 counselors. LoanPort documents are scanned and sent electronically instead of being faxed.

Another key for counselors is the ability to check the status of applications online and to see what documents the servicer is using to make its decision on easing loan terms. That's important because sometimes servicers make decisions based on old credit reports, Hasson said.

For all involved, LoanPort is expected to ease the problem of incorporating changes to federal loan-modification programs and to allow more precise measurements of where the loan-modification process is breaking down.

For Radian, LoanPort is part of a broader effort to keep borrowers from losing their homes, so the company wouldn't have to pay claims. In the first quarter, 4,159 Radian-insured mortgages were modified, compared with 1,769 in all of 2009.

In March, Radian experimented by sending out a troop of former law enforcement officers to knock on doors in California and other states with extremely high delinquency rates. Visits to 155 properties resulted in the completion of 40 loan-modification packages, said Paul Fischer, Radian's executive vice president of loss mitigation.