Subprime loan servicer Ocwen Financial said today the re-default rate on loans it services was less than half the number recently disclosed by OCC chief John Dugan.
After six months, the 60-day delinquency rate on Ocwen-modified loans was 24.6 percent, well below the 53 percent rate unveiled by the OCC earlier this week.
Of course, the OCC numbers are tied to 30-day lates, which are less severe than those two months in arrears, though maybe not by much.
Ocwen CEO William C. Erbey attributed his company’s relative success to the design of the loan modification itself and cautioned looking too deeply at overall re-default rates.
“Our loan approach achieves the twin objectives of keeping homeowners in their homes and maximizing the net present value of the mortgages to the investors who own the loans,” he said.
“We believe she (Sheila Bair) is correct that the re-default problem lies with how some servicers are doing modifications, not with concept of modification. It’s possible to do modifications right. It’s challenging, but we’re doing it — and doing it in a way that’s scalable.”
Ocwen’s proprietary servicing systems use things like artificial intelligence, rules-based systems, and net present value cash flow algorithms to analyze loans.
Additionally, the company recently established a “Psychology Department” to integrate behavioral sciences with its decisioning models to up its success rate.
Ocwen said despite having a more challenging portfolio than other servicers, losses on the subprime loans it services are half the industry average.
So far this year, the servicer has helped keep 60,000 “troubled mortgages” performing.