Mortgages Blog

Finance Blogs » Mortgages Blog » A bank against foreclosures

A bank against foreclosures

By Polyana da Costa ·
Thursday, September 8, 2011
Posted: 4 pm ET

Banks can work with borrowers, help them avoid foreclosure and remain profitable.

That's a lesson large lenders should learn from Webster Financial Corp., a regional bank based in Waterbury, Conn. The bank, which services $8 billion in mortgages and home-equity loans, has been able to prevent foreclosures, for the most part, by helping borrowers and providing them with good customer service.

According to a story published in The Wall Street Journal this week, the lender has taken a proactive approach to loan modifications and has profited from doing so.

The lender offers struggling borrowers a chance to extend loan terms and reduce interest on mortgages that are owned by the bank, the article reports. While restructuring the loan, the bank waives late fees, penalties and unpaid interest. Most servicers simply add those costs to the balance of the loan. About 80 percent of the modifications started by Webster are approved. Big banks have long been criticized for putting borrowers on trial modification plans, requiring them to make payments for several months and later telling the borrowers they don't qualify for a permanent modification.

Webster has completed about 1,184 modifications. Of the loans reworked in 2010, less than 10 percent became delinquent again.

The lender's success in preventing foreclosures is largely attributed to well-prepared staff.

The WSJ says most of the modification specialists at the bank have been on the job since 2008. The bank was "ahead of the industry" in creating a single point of contact for financially trouble borrowers, according to the story. Also, Webster has a group of loan modification specialists who get paid bonuses that are based partially on the number of modifications completed.

Granted, it's much easier to deal with an $8 billion portfolio than it is for large banks to handle portfolios worth trillions. Plus, Webster owns 75 percent of the loans it services, which makes it easier for the bank to make its own decisions because it doesn't need to follow investors' guidelines. Large lenders often say they don't have much flexibility to modify loans that they service because they don't own most of the loans.

Still, lenders and services should take Webster as an example and make an effort to understand that if they train their staff appropriately and try to work with borrowers, they can avoid losses and help solve this foreclosure crisis.

It's not like Webster is giving away money or being a Good Samaritan. The bank is simply making the effort to help keep borrowers current on their mortgage. It's a wise business approach.

Why can't others do the same?

Follow me on Twitter: @Polyanad

Bankrate wants to hear from you and encourages comments. We ask that you stay on topic, respect other people's opinions, and avoid profanity, offensive statements, and illegal content. Please keep in mind that we reserve the right to (but are not obligated to) edit or delete your comments. Please avoid posting private or confidential information, and also keep in mind that anything you post may be disclosed, published, transmitted or reused.

By submitting a post, you agree to be bound by Bankrate's terms of use. Please refer to Bankrate's privacy policy for more information regarding Bankrate's privacy practices.
September 20, 2011 at 5:34 pm

Geeze wish they had mine :( instead i am at mercy of the Big BOA whos auto draft program glitched when i moved a pmt by ONLY ONE WEEK due to new lower employment at that horrid period when the economy tanked. I'd of been better off if I hadn't of moved it and let it pay by my banks overdraft privilege. Instead i gave them a check by phone for that week later pmt. I was assured by the rep the auto draft would continue without problem (the way i had it my mortgage was being deducted 1 month prior to its due date so it was paid on the 1st every month) and since i had been on it for years I saw no need to follow up. 6 months later i found it was not drafted so another check by phone to fix and another glitch so it went from 1/2 month behind in drafting to 1 month!! THEIR FAULT WITH SERVICING! At a time when we could not afford any glitch whatsoever being on extremely tight budget. many calls and reps later assuring me again its not late i find it actually is and i am being dunned on my fico score every dang month. I asked they move 1 month to end of note and continue with auto draft - they said they don't do that no way no how and I now am s****** for any refinancing or even a small note to make that payment up that they messed up to begin with. I make my mortgage each month, but they are still reporting me as bad. They are horrible to deal with and it is absolutely wrong and unfair of them to do this to us I will never trust a word of what their reps or officers say ever again.