LoanCare launches distressed mortgage unit

A subservicer focused on government-related loans has started a new unit called Velocity that will aim to more efficiently manage mortgages using analytics.

Velocity Servicing’s formal launch marks the outcome of LoanCare’s 2021 hire of former Goldman Sachs Vice President Matt Stadler, who the company brought in to build out an independently run special-servicing division.

The name is tied to the division’s aim to more quickly make decisions and take action on distressed mortgages through automated analysis of factors that could affect processing and return on investment.

More than 40% of LoanCare’s portfolio based on loan count consists of mortgages in government bond insurer Ginnie Mae’s securitizations, some of which are backed by the Federal Housing Administration and made to lower-income first-time buyers who tend to be more credit sensitive. Another small component representing around 9% of the loans includes some private mortgages that also may have higher delinquency rates. Mortgages backed by government-related entities Fannie Mae and Freddie Mac, which tend to have fewer payment difficulties, make up the other half of its portfolio.

The new division highlights a renewed interest in automation of distressed mortgage servicing as financial forecasts have increasingly predicted a downturn, and some banks have been failing.

“We have a tougher economic environment ahead of us. That’s going to drive up delinquencies and defaults,” Jerry McCoy, senior vice president, performance management at LoanCare, said in an interview at the Mortgage Bankers Association’s servicing conference last month.

Across the board, the company more broadly also has been focused on providing its customers with “visibility in performance,” McCoy said.

Distressed servicing has had a tendency to lag in automation and the increased likelihood of economic weakness and rollback of pandemic relief has highlighted it, Jane Mason, CEO of another technology provider in the space called Clarifire, said in a separate interview last month.

“During COVID, the sheer necessity to handle the volume and velocity meant companies had to invest in some technology. Now they need to expand that investment in order to survive, because they’re going to have more complexities associated with the delinquencies, and you have to automate the complexities out of those delinquencies,” she said.

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