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For Immediate Release |
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March 25, 2009
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Protiviti Provides Insight into "Home Affordable" Loan Modification Program
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Protiviti's latest Global Financial Crisis Bulletin analyzes new mortgage loan modification standards from perspective of mortgage loan investors and servicers
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MENLO PARK, Calif. – March 25, 2009 – As the Federal Government continues its efforts on behalf of beleaguered homeowners, Protiviti, a global business consulting and internal audit firm, is helping loan holders and servicing organizations assess the potential value of and challenges associated with the latest home loan modification program. Protiviti has made available the latest edition of its Global Financial Crisis Bulletin, The "Home Affordable" Loan Modification Standards: What Loan Servicers and Investors Need to Know.
The bulletin examines the U.S. Treasury Department guidelines, the prospects for the program's success, and the questions that loan holders and servicing organizations should ask before they decide whether to participate in the program.
"For most loan holders and mortgage servicing executives, the question of whether the program will work from a macroeconomic perspective is likely less important than the immediate question of what impact the program will have on their organizations, and what steps they should be taking to prepare," said Carol Beaumier, a Protiviti executive vice president and leader of the firm's Global Financial Crisis Team. "We believe leaders in the mortgage industry will want to consider a number of factors, including comparing any current programs they have in place with the new national program and, for those organizations with no existing plan, whether they want to participate at all."
Protiviti's The "Home Affordable" Loan Modification Standards: What Loan Servicers and Investors Need to Know bulletin poses the key questions that lenders should address before participating in the Home Affordable program. Those questions include:
- Do we currently maintain all of the data elements that will be required to be collected and reported under the program? If so, how comfortable are we with the integrity of our existing data, and what steps should be taken to validate it?
- What would be the cost and time required to put these programs in place compared to the financial benefits we would expect from participating in the program?
- If we do not currently offer a modification program, what level of staffing will be necessary to design, implement and monitor the program; underwrite and render decisions on modifications, etc.?
"The loan modification program is designed to provide assistance to as many as 3 to 4 million homeowners," said Michael Brauneis, a director in Protiviti's regulatory risk practice. "Whether or not loan holders take advantage of the program will depend on several things, such as their assessment of the value of the financial incentives being offered by the Treasury Department," noted Brauneis. "The ‘Home Affordable' plan may not represent a silver-bullet solution to the housing crisis; however, it is likely to be at least a step in the right direction."
Protiviti's bulletin covers a number of the reasons for optimism and pessimism regarding the plan. Here a few highlights from that section of the material:
| Reasons to Think it Will Work |
Reasons to Think it Won't Work |
| The existence of a national standard in any form will likely cause many loan servicers to "get off the fence" and begin to offer modifications. |
The "all or nothing" nature of the plan (in that all loans must be serviced according to the plan if a servicer chooses to participate) could give pause to many and drive down participation rates. |
| The cash incentives have, for the most part, been structured carefully to encourage solutions that minimize the risk of re-default. |
The program does little, if anything, to address effectively the huge number of properties currently underwater. |
| The outlook for the program's effectiveness improves if it is viewed as the "carrot" in connection with the "stick" of proposed bankruptcy cramdown legislation. |
The likely effectiveness of the provision to pay borrowers who continue to make payments as agreed following modification is questionable. |
To access a complimentary copy of The "Home Affordable" Loan Modification Standards: What Loan Servicers and Investors Need to Know, please visit www.protiviti.com/economiccrisis.
Protiviti's Global Financial Crisis Team is a cross-disciplinary group composed of seasoned professionals with deep industry, financial risk management, regulatory, technology, restructuring and litigation support experience. Coordinated by Protiviti's global industry and solutions leaders, this strategic team provides clients with advice on responding to market conditions, as well as updates on market and regulatory changes, and works closely with the firm's client service teams to help clients deal successfully with the unfolding global economic environment.
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About Protiviti |
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Protiviti (www.protiviti.com)
is a global business consulting and internal audit firm composed of
experts specializing in risk, advisory and transaction services. The
firm helps solve problems in finance and transactions, operations,
technology, litigation, governance, risk, and compliance. Protiviti's
highly trained, results-oriented professionals provide a unique
perspective on a wide range of critical business issues for clients in
the Americas, Asia-Pacific, Europe and the Middle East.
Protiviti has
more than 60 locations worldwide and is a wholly owned subsidiary of
Robert Half International Inc. (NYSE: RHI). Founded in 1948, Robert Half
International is a member of the S&P 500 index.
Protiviti is not
licensed or registered as a public accounting firm and does not issue
opinions on financial statements or offer attestation services. |
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