The American Securitization Forum (ASF) today issued operational guidelines that assist mortgage loan servicers and counseling organizations in implementing procedures for reimbursing expenses that are associated with the provision of
borrower counseling services.
These set of guidelines follow the ASFs October 2007 guidance that borrower counseling fees can be reimbursable from securitization cashflows if the servicer concludes that the counseling service has or is probably going to mitigate losses and maximize recovery on loans that are in default or in instances where default is reasonably foreseeable.
Servicers are legally obligated to mitigate losses and maximize recoveries on each mortgage loan, acting in the best interests of the investors in a securitization trust comprised of these loans, said Tom Deutsch, ASF deputy executive director . Borrower credit counseling is one of several tools servicers can use to preserve homeownership and prevent foreclosure, which is the best solution for borrowers and investors alike.
The guidance is mainly intended for securitized residential mortgage loans. It suggests that servicers can pay back up to $150 out of securitization trust proceeds for any approved counseling session.
Other specific recommendations offered to servicers under the guidance include contracting with quality and trusted counseling organizations. These organizations are supposed to assist borrowers in connecting with servicers, collecting information relevant to loss mitigation evaluations, and recommending appropriate loss mitigation alternatives to servicers. They must also help borrowers in restructuring the full range of their debt obligations to help these borrowers better meet their mortgage obligations.
Additionally, the guidance noted that servicers always have a contractual obligation to consider, on a loan-by-loan basis, the range of available loss mitigation alternatives for a borrower and that counseling expenses should still be reimbursed irrespective of the results of the loss mitigation effort.
Loans that are eligible for counseling reimbursement include those that are in delinquency and those that are current but where default is imminent or reasonably foreseeable. Eligible mortgages also include those that are in loss mitigation with extenuating circumstances. The loans that fall under this category are mortgages that have a rate reset coming in six months, or are within 30 days of a foreclosure sale, or loans where the servicer documents the individual counseling expense as having a net present value benefit.