Staff of four career counselors
By MortgageDaily.com staff
9/9/2005

Helping unemployed borrowers in delinquency find jobs has proven to be a "highly effective" loss mitigation strategy for NovaStar Mortgage, which has aided hundreds of borrowers in avoiding foreclosure over the past year.

The loan origination and servicing division of NovaStar Financial Inc. announced Tuesday the results generated from its LaunchPoint program, which it says is the "first job placement and counseling program offered by a mortgage company."

Since the program's inception in August 2004 through the end of July, NovaStar has "placed more than 200 unemployed borrowers in jobs and successfully avoided foreclosure," according to the announcement.

The job placements were achieved with the help of career counselor staff, which has grown from two at the beginning of the program to four workers who assist NovaStar mortgage borrowers to write resumes, practice their interviewing skills, connect with search firms and employment databases, and apply for jobs that match their skills.

"Loan servicing plays a critical role in managing credit risk as well as in borrower retention," said NovaStar President Lance Anderson in the announcement. "We aren't aware of any other mortgage company going to this length to help borrowers protect their investments despite events that can trigger financial setbacks."

Despite the costs associated with foreclosure, "the servicing industry as a whole has been slow to implement foreclosure avoidance strategies," said Chris Miller, senior vice president of servicing and co-creator of the program, in the announcement.

"Foreclosure should be a last resort, both for the sake of the borrower and in the best interest of the mortgage company," Miller added.

On average, a foreclosure costs a lender up to $60,000 in lost interest, property management fees, legal bills and resale commissions, NovaStar reported. Additional losses can ensue from a weak real estate market in the area where the property is located and a lengthy sales process.

Thus, "keeping customers in their homes makes good business sense," Miller said, noting that the program, which costs roughly $400,000 to operate, has in one year enabled NovaStar to avoid "more than $2.5 million in losses on more than 200 mortgage loans representing principle balances totaling over $17 million."

The program apparently picked up pace this year. In early December, NovaStar said 275 people were using the program and that about 35 people had found jobs with an average time of 25 days to reemployment.

The Kansas City, Mo.-based lender said the program is praised by borrowers, including a 52-year-old divorcee who commented, "NovaStar has been very understanding about my situation and I really appreciate their support."

Article © MortgageDaily.com All Rights Reserved