Insurer Radian trying to keep borrowers in homes

The subprime meltdown is forcing at least one major mortgage insurer, Philadelphia's Radian Group Inc., to launch an unprecedented financial-salvage operation.

Facing mortgage claims estimated at $1 billion this year, Radian is trying to help borrowers stay in their houses or get out from under their loans more easily, while cutting its own losses. The whole industry is scrambling for ways to mitigate losses.

Today, potential solutions specifically for Philadelphia are on the agenda at a hearing before the City Council Committee on Housing, Neighborhood Development and the Homeless. Advocates are pushing for a moratorium on sheriff's sales involving subprime mortgages.

Radian's national pilot program, launched recently with five mortgage servicers, offers to pay 15 percent - up to $15,000 - of a potential claim in advance to forestall a full claim.

For example, if a lender holds a $100,000 mortgage that is likely to go into default, the lender could get up to $15,000 from Radian to work out new terms with the borrower.

And Radian is taking the unusual step of forgoing repayment of the advance.

"The focus of everything we're doing right now is to bring payments down," said Paul F. Fischer, executive vice president for loss management at Radian Guaranty Inc., a unit of Radian Group Inc.

The company has a strong motivation to keep borrowers paying on their loans. Radian had $1.3 billion set aside for mortgage losses and had insurance on 60,848 loans in default on Dec. 31. The company said last week that it expected to pay $200 million in claims in the first quarter of this year, up from $94 million in the same period a year earlier.

Every effort - including Project Lifeline, announced last week - to keep delinquent borrowers in their houses is smacking into the limited capacity of mortgage servicers to handle the onslaught of telephone calls, officials at Radian and local nonprofit housing-counseling agencies said.

Patricia Hasson, president of the nonprofit Consumer Credit Counseling Service of the Delaware Valley, said yesterday that the pace of loan modifications was picking up, but "there is still a lot of work to be done."

Two weeks ago, Radian hired Hasson's Center City group, which employs 20 full-time counselors - seven more than a year ago - to call 1,600 borrowers likely to default on their loans.

Hasson said those counselors were hearing that it was taking longer for troubled borrowers to receive a reply from servicers after they had sent in their information on income and expenses, which servicers require to make a decision on a modification.

Missing loan documents delay some borrowers from getting help.

That happened to Tina Woodridge, who lives in the Overbrook section of Philadelphia. Early last month, she called the Philadelphia Unemployment Project for help in negotiating a change to her adjustable-rate mortgage. The monthly payment had jumped from $535 to $1,000 in September. She has been about 30 days behind since then.

Woodridge did not have her loan documents because the person from whom she got the loan had kept them to look into some questions about the terms. Brendi Lopez, her housing counselor, wanted the documents to determine whether the loan was worth modifying or whether it was faulty in some way.

In other cases, delays are caused by bureaucratic morass. Pamela Kennebrew, another housing counselor at the Philadelphia Unemployment Project, described a client who came for help Dec. 27, got tentative approval 11 days later for a loan modification, but heard nothing more until yesterday.

That is when Kennebrew learned that a different person at the mortgage company needed to negotiate changes to the loan. Now, the counselor must resend all the client's information. "They will take three weeks to get back to us," Kennebrew said.

The overarching challenge for the industry is establishing more efficient processes and clear channels for the flow of information.

"With every good idea, there's a process that kills it," said Camillo T. Melchiorre III, a senior vice president at Radian, which employs 80 in its loss-management department, including those who pay claims.

Radian is trying to get better data that everyone can use to work out deals with borrowers, instead of having different players looking at different sets of information and constantly duplicating one another's work, Melchiorre said.

The question is: "How do you get one sheet of music that we can all read from," he said.