By Donald L. Morrow, Ph.D., Senior Consultant, Econometrician, Wolters Kluwer Financial Services|PCi
- Loan modification is a complicated process, focus on what is important and find what is measurable.
- “Where” can be as important as “whom.”
- Remember to focus on differences in frequency between protected and non-protected classes of key variables such as modifications, re-defaults, and foreclosures.
- Don’t forget to look at differences in the mean values pre-mod and post-mod such as payment and APR.
- The borrower has a much more important role in the process, acting as a demander of loan modification services. Often their role in the process is un-measurable, but should not go un-documented.
- Don’t forget to look at the process underlying your NPV calculations.
- HAMP may go away, but how it looks at the loan modification process will remain.
- Be pro-active. Approach your regulator with a plan on how to manage the fair lending risk.
