Lenders of all sizes have been pointed out by experts for irresponsiveness in handling the loss mitigation of delinquent mortgage loans. Loss mitigation specialists report in some cases spending close to two hours over the phone just to pinpoint the right representative to speak with in the company. “Trying to find a responsive individual with actual decision making authority in the banks has become increasingly difficult since the sub-prime debacle.” says David Cavarra, a Loss Mitigation Specialist for I Short Sale, Inc. in Woodland Hills , CA .

“Banks must act quickly to improve efficiencies; there needs to be set procedures within a single department handling the loss mitigation of delinquent borrowers. Whether some banks purposely try to avoid communicating with loss mitigation specialists or not, this lack of concern and over all ineffectiveness is something that will eventually catch up with them.”

Some banks still do not have the right infrastructure and capabilities to handle the influx of delinquent borrowers. The declining state of the real estate market has left borrowers who are behind on mortgage payments with a declining property value and a lack of refinancing options.

Industry professionals suggest that one of the main reasons why some of these banks are so irresponsive to loss mitigation specialists is simply because they refuse to admit any losses now. For banks, loss mitigation translates into underperformance, which many financial institutions just cannot accept. Wells Fargo Bank and American Servicing Company, for example, have been cited as notorious by some loss mitigation specialists for being the least responsive and having the most “lost faxes and paperwork”. Representatives are trained to be “gatekeepers” and seek solely the bottom line, or the dollar amount, rather than looking for the best interests of the borrowers. In addition, many lenders are extremely inflexible when looking for a solution, as some rely on property appraisals as much as 6 months old. “Unfortunately, in many parts of the country, a 6 month period in the market today just does not hold up. Not taking the time to reevaluate values results in more and more properties going into foreclosure. This defeats the purpose of loss mitigation,” explains Cavarra.

What lenders tend to forget, experts suggest, is that engaging in some sort of loss mitigation procedure results in saving time and effort in the long run. Though it may involve a loss in collections now, avoiding the addition of a foreclosed property to an already expanding REO portfolio is a strategic move on a lender's behalf, especially in a declining market.

Some banks, on the other hand, have slowly adapted to today's declining real estate market by establishing infrastructure and making other necessary changes to handle loss mitigation. Accommodations and concessions have been made by lenders in order to avoid taking properties back. Even the Department of Housing and Urban Development (HUD) and the Federal Housing Administration (FHA) have become responsive and involved by offering financial incentives to lenders who will be more flexible and open to loss mitigation techniques.

Industry experts say that with the current direction of the market, lenders who prove themselves to be the most flexible and adaptable will be the ones who will come out on top in the long run; even if it means taking on smaller losses today to avoid larger ones in the future.