Rethinking the default landscape: the industry has endured waves of defaults before. But this time, things are a bit different. Consumer attitudes, loan products and market dynamics have all changed.

Summary

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Cover Report: Delinquency / Default Management

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Rethinking the default landscape: the industry has endured waves of defaults before. But this time, things are a bit different. Consumer attitudes, loan products and market dynamics have all changed.

The default servicing industry has witnessed tremendous change over the last two decades. Twenty years ago, the life span of a delinquent loan was much shorter than it is today. In those days, delinquent loans went into foreclosure, and, if they were sold to an investor, there was scant chance of any loss mitigation or loan workout. * The mortage industry's rigid default-servicing processes were routinely applied against a consumer-behavior model that was well understood and relatively consistent. Today's consumer and market circumstances represent a quantum shift from traditional risk-management and loss-mitigation approaches. * Many lending practices of the recent past were overly risky, and some products were excessively complex, resulting in widespread consumer and market misconceptions regarding loan terms. The billions of dollars of mortgage and real estate losses that have resulted represent just a fraction of the total market impacts and cross-industry mark-to-market write-downs that are the byproduct of the current default crisis. * Consumers also began behaving contr...

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