Portfolio Cleansing in Mortgage Servicing

This document is a guide that outlines the concept of portfolio cleansing within the mortgage servicing industry. It describes the shifting landscape of the industry, particularly the growth through loan portfolio acquisitions, and the associated risks such as pre-existing property tax delinquencies. The guide explains the need for a proactive approach to identify high-risk loans during ownership changes to mitigate operational risks. It details the portfolio cleansing process, which involves using a comprehensive property tax dataset to identify delinquencies and remedy them promptly. The document presents a case study of a national prime lender that utilized the portfolio cleansing methodology to enhance due diligence and minimize penalty and interest charges associated with delinquent loans. By addressing these issues shortly after loan acquisition, the lender was able to reduce exposure to loss of collateral and improve the borrower experience.