With loan foreclosures up 176% this year, compared to 2007, it’s high time that we took a good look at the software tool – and the company that makes it – that promises to help troubled mortgage holders work out more favorable terms for their mortgages.
In doing so, Computer Sciences (the company that created the mortgage adjusted software I’m talking about) could make a boatload of money on fixing bad mortgages.
Loan “workouts” are up 125% since 2007 but there are millions of anxious homeowners who, the U.S. Treasury Department says, won’t pick up the phone and seek help with their house payments. I suspect that such homeowners are being inundated with mailers, circulars, phone calls, and email pitches touting the mortgage of their dreams. But responding willy-nilly to such pitches is what got many of these folks in trouble in the first place.
Naturally, they’re skittish.
But that’s where CSC comes in. Mortgage services really don’t mind talking to homeowners about reworking their mortgages. Better to lose $25,000 off of the principal than lose $150,000 in a foreclosure deal. But there hasn’t been a soup-to-nuts software package that lays out best practices, new loan scenarios, and loss mitigation factors and wraps them all up in in one neat, tidy package. At least one that makes sense to both the mortgage servicer and the mortgage holder. But CSC's mortgage-workout software is changing the game.
A recent article in Forbes describes how the CSC software works:
“In the past month, counselors at the Consumer Credit Counseling Service of Greater Atlanta have started using the Web-based technology, which allows them to plug in homeowners’ financial data and review servicers’ loan modification rules. If the counselor sees a logical workout option, and the borrower consents, the proposal gets routed to the servicer.”
“Wells Fargo, Bank of America, and soon, Countrywide Financial, are providing loan data. Eventually, CSC expects to collect $3 from mortgage servicers for every workout proposal sent by credit counselors. That's minuscule for CSC, which had revenues of $14.9 billion in 2007, and it's too early to predict whether transaction volume and market penetration will be strong enough to keep the product going past 2008. If the software gets adopted by credit counselors nationwide, however, it has a better shot at delivering healthy profits.”
I sure think so. Countrywide alone has over $1.5 trillion in troubled mortgages. If CSC’s software is used to work out 20% of them, that’s over $22 billion in mortgage assets. As they say in Washington, a billion here, a billion there, and pretty soon we’re talking about real money.
CSC’s stock, which was trading at $59 per share late in 2007, has been slashed in half at $40 at the end of today’s trading. But every time talks begin on a massive U.S. homeowner bailout, the software company that should get the first call from the U.S. government will be CSC.
My take? Be there when the phone rings.