Press Release

Loan Value Group Launches RH Reward Program for Responsible Homeowners; Major U.S. Investor Is First User of New Strategic Default Mitigation Platform

Loan Value Group LLC (LVG) today announced the launch of an incentive-based program to address the potential for strategic default in the more than 10 million homes in the U.S. with substantial negative equity – representing nearly $2 trillion of mortgage debt. The vast majority of these loans are held by the United States Government, banks, and investors around the world. The program, called the Responsible Homeowner Reward ('RH Reward'), is a turnkey, private label program that creates incentives for borrowers to remain current on their mortgage payments without changing the terms of the original mortgage note or reducing principal. The program, developed with a foundation in behavioral economics, employs patent-pending technology developed by LVG.

The program is being launched with one of the largest investors in consumer and mortgage debt in the U.S. The client, who has asked for anonymity during the rollout phase, has purchased and sold over $5 billion of debt since 2008.

Using the RH Reward program, LVG will work with owners of risk to target, contact and ultimately enroll borrowers who are at the greatest risk of strategic default. The firm’s proprietary model evaluates each individual borrower's propensity to strategically default (as distinct from the risk of affordability default) to arrive at the optimal Reward size. Negative equity, income, geography, and a number of other related factors are considered when determining the size of each Reward. The desired outcome for all parties is to create an incentive for the borrower that positively influences behavior, at a cost to the risk owner that is far cheaper than every other option, including delinquency, sale of the note, or default.

“RH Reward is the only program of its kind in the mortgage industry, and its structure and incentive-based design are unique. There is no cost to the borrower whatsoever, yet the homeowner receives the full benefit of the Reward,” said Loan Value Group CEO Howard Hubler. “At the same time,” he added, “one of the key selling points of RH Reward is our ability to offer the program to owners of risk in a variable cost, turn-key fashion without burdening their current infrastructure.”

The unique structure of the RH Reward program enables risk owners to effectively address each of the following issues:

Accounting: Modifying or appending a current (or mildly delinquent) mortgage raises the risk of having to write the underwater loan down to a current market value. The RH Reward design allows many regulated financial institutions to avoid Troubled Debt Restructuring (TDR) when influencing payment behavior.

Infrastructure Burden: Many loan modification strategies are ineffective due to the servicer’s inability to execute any loss mitigation strategy in scale. The RH Reward Program overcomes hurdles like inferior technology, an inexperienced loss mitigation staff, and the servicers’ inability to create an effective solutions program with a low cost of execution.

Fairness: RH Reward is designed to reward the borrower with substantial negative equity who remains (or becomes) current, while simultaneously creating a natural barrier to fraud and moral hazard.

Timing: Typical loan modifications can now take up to 4 months. A borrower receiving an RH Reward can be closed in days after being selected to participate in the program.

Cost: The total cost of the RH Reward solution is substantially less than the overall cost of a foreclosure, principal reduction, or loan sale. Additionally, if the borrower subsequently defaults (or re-defaults), the Reward is never paid, costing the loan owner nothing.

Legal: The RH Reward program can legally be implemented in scale on both securitized and unsecuritized loans without penalizing either the borrower, for where their note resides, or security (or note) holder, for how their risk is structured.

Working with a global enterprise solutions provider with an established track record, LVG’s borrower outreach platform includes 24/7 call centers that provide the operating infrastructure of RH Reward. This structure allows the program to be implemented in scale, nationwide, with little or no servicer involvement. This feature gives flexibility to mortgage owners seeking to enhance their current servicers’ preemptive loss mitigation strategies.

“The RH Reward Program is effective because it rewards proper payment behavior, but doesn’t change the existing mortgage note or burden the servicer. It is, by far, cheaper and simpler to implement in scale than any other loss mitigation strategy,” Hubler said.

Borrowers who receive an RH Reward can be “closed” within only a few days of being contacted (as compared to a few months for a typical modification). The mortgage is not being restructured and accordingly does not have to go through the many legal and administrative hurdles experienced in a normal modification.

RH Reward offers loan owners a means to improve performance by addressing negative equity loans that are at a high risk of strategic default before they go delinquent. RH Reward alleviates the homeowner’s balance sheet pressure without resorting to principal forgiveness, and, in most cases, without triggering Troubled Debt Restructuring (TDR).

The overall structure and execution of the program, including the customized size of each individual Reward, was designed by industry leaders in behavioral economic theory, consumer marketing, and mortgage finance. The hallmark of the Program is LVG’s ability to reach the homeowner with a tangible and highly credible offer designed to achieve the desired behavioral result. LVG’s expertise and scalable operating platform offer tremendous benefits to loan owners and servicers alike. The RH Reward program will align for the first time, the interests of borrowers, lenders, insurers, and investors, as well as state and local municipalities.

By implementing the RH Reward Program, risk owners can take a leadership role in the mortgage industry by offering borrowers a consumer-friendly, incentives-based program while optimizing long term value creation for their shareholders.

About Loan Value Group LLC

Loan Value Group LLC, based in Rumson, NJ, is a solutions provider to owners of risk that directly address strategic default. LVG’s incentive-based solutions allow mortgage owners and servicers to positively influence consumers by rewarding timely mortgage payments. LVG is the exclusive provider of the Responsible Homeowner Reward ('RH Reward'). For more information on the program, please contact Frank Pallotta or visit Loan Value Group.