When You Fall Behind on Your Mortgage – Mindset of the Collector

House Falling Down

During my years as a first party collector for a mortgage company we learned a lot about people who don’t pay their bills. One of the most common things we noticed is the people didn’t really understand why they couldn’t pay. They just knew that at the end of every month they had less money than was required to pay whatever bill it was that happened to be due. Most mortgage payments are due around the first part of the month so guess who didn’t get paid? There are so many reasons someone falls behind on their bills from gross neglect to dire medical emergencies. Our jobs as collectors was to take the emotion out and sympathize without allowing ourselves to empathize with them. In theory this allowed us to take an objective look at their situation to determine the proper course of action to resolve not only the delinquency but the situation that caused the delinquency to occur.

There is a big distinction in 1st party collections and 3rd party collections when it comes to the initial mindset of collections. As a 1st party collector you are a direct representative of the mortgage lender and your main goal is to ensure the borrower pays on time every month for the full duration of the loan. You don’t just want to collect, you want to make sure they are able to stay current. Your ultimate  goal is to improve the bottom line for the business and that means collecting regular interest payments from the borrower, not pissing them off and having to repossess* their home.

1st Stage of Collections

Collections on an overdue mortgage in my office would begin anywhere between 2-15 days past due. The initial contact attempts are mainly just to check with the borrow to ensure they didn’t “forget” to pay their payment or to see what the problem is and make arrangements to pay the current months payment. A good collector will realize someone who is already 15 days past due this month may not be on time next month and try to make arrangements for future payments as well. Collectors shouldn’t force the issue to much during this stage of “lateness” because the loan is most likely not considered delinquent until they are at least 30 days past due.

True Collections

When a loan reaches 30 days past due the loan is officially delinquent. Depending on the reporting dates for the mortgage company it could be reported on your credit report as late/delinquent immediately or not until the following month.  Collectors are in for a tougher go of it because they have to not only collect or make arrangements for the current months payment but they also have to make arrangements for the missed payment as well. The ultimate goal, regardless of the stage of delinquency, is always to bring the account current and ensure the borrower can keep it that way.  The goal of a good collector at this stage should be to take full assessment of the situation and determine what caused the delinquency and what the borrower might be able to do to ensure the account is brought current and stays that way.

Collectors can find themselves taking on the role of a very much uncertified debt councilor to people who don’t know they have anywhere else to turn. It is a hard situation to be thrown into but you learn to adapt and hopefully provide help to people who are in disparate need of it.

The Exception

When it hits the last week or the last couple of days of a month take all the good stuff I said about collectors trying to help and throw it out the window. In fact throw it in the garbage, crap on it, and set it on fire. At this point in the month the only goal of the collector, their boss, and probably their bosses boss is to meet the target delinquency goals so they can all get their bonus. What this means for the borrow is instant demands for payment, a total disregard for the customers overall well being and lots of phone calls. It isn’t unheard of for a collector to suggest a borrower take a payday loan or title loan to pay off their delinquent debt to the mortgage company. This is the point where you start to see people lose their cool, the bonuses for meeting goal can be quite substantial giving the collectors a big incentive to disregard what is best for the borrower and look at what is best for them. This is the unfortunate truth and greed of the collections world.

*When I talk about my collections experiences you may see me use the terms repossession and foreclosure interchangeably. To me they were mostly the same term since I worked as a collector for a company that did loans on mobile homes. If a mobile home had no property financed with it it is treated like a vehicle and registered with the Department of Motor Vehicles (DMV). You don’t foreclose on a car you repossess it, the same holds true for non-land deal mobile homes.

{ 5 comments… read them below or add one }

1 RJ Weiss January 28, 2010 at 1:50 pm

That’s a very interesting point of view. Never have heard the story from the “other” side.

Great tip about the last few days of the month.

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2 Ken January 29, 2010 at 6:08 am

Can you tell me what amount a typical bonus is?

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3 Kyle January 29, 2010 at 7:28 am

It was so long ago that I was in collections that I can’t remember the exact amounts, I will look into it though and if I can get the answer from some of my friends who are still in the biz I will shoot you another e-mail and let you know. From what I can remember it wasn’t earth shattering amounts but for us it was huge. I was only 19 when I was doing collections so what seemed like a lot to me probably wasn’t as much I think it was.

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4 Wojciech Kulicki January 30, 2010 at 12:45 pm

What an interesting perspective from the other side of the coin, which we don’t get to hear that often. It’s great that collectors are so willing to help, but as you point out, unfortunate the way the system is set up because everything goes out the window at month’s end. Kind of counter-productive to the whole…

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5 Kyle January 31, 2010 at 10:53 pm

Kind of counter-productive to the whole…

It is counterproductive over time but the company only has to report their delinquency numbers at month end, so if you are one month behind but pay on the last day then the account is reported as current even though there is no way they can make the next payment which is due tomorrow. The investors only see that the account was “current”. This increases the value of the portfolio which is good for business, bad for the customer. The ultimate goal should always be to get the customer to pay and be current.

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