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Firm shifting emphasis to loan workouts.

THE NUMBER OF LAWYERS employed by Wilson & Associates actually declined over the past year, from 42 to 36, which seems counterintuitive for a firm whose practice is built upon the legal issues involved in mortgage lending, including foreclosures.


Jennifer Wilson-Harvey, manager of the firm's Little Rock office, said some of the decline was simply temporary fluctuation: "We have a few open spots, but we're waiting to see who passes the bar and who doesn't." Four additional lawyers are expected to be on the masthead by August. But she also suggested that the constant hiring of new lawyers that characterized Wilson & Associates for the past few years is over.

"We've also been modifying some of our practices and procedures to make them more efficient in the hopes that we won't need more and more attorneys in this (period) of big volume," she said.

Wilson-Harvey, former wife of founder and managing partner Robert M. "Robby" Wilson Jr., initially referred to the firm's new organization as "leaner and meaner" but quickly corrected herself. "We're not mean; we're very nice."

Nice matters when you are in the foreclosure business, which is a significant portion of the work that Wilson & Associates does for the mortgage lenders it represents through Arkansas offices in Little Rock, Fayetteville and Newport and Tennessee offices in Memphis, Nashville and Knoxville.

"These are Arkansans and we live here. We can't fix their problems, but we don't have to be punitive about it," Wilson said last week.

Foreclosures have definitely been on the upswing, but a far bigger growth area for Wilson & Associates is the loss mitigation department, which was originally called the reinstatement and payoff department.

"'Borrower relief' would be a better name," according to Greg Harrington, a Dallas mortgage lending consultant who has been working with Wilson & Associates to develop workout products for borrowers who are facing foreclosure.

"The government as well as all of our clients have been working hard to get the processes in place, and that's very much top-of-mind for us because that's what our clients want--performing loans rather than nonperforming loans," Wilson-Harvey said.

Beginning about 18 months ago, she said, the loss mitigation department has been staffed up and trained to help match distressed borrowers with new initiatives offered by borrowers. Improving the terms of the problem loans generally doesn't require an attorney if the lender has already designed programs and products and set the parameters for identifying eligible borrowers.

"As we have more loss mitigation and fewer foreclosures, we need fewer lawyers and more workout professionals," Wilson said.

Harrington, who spent 13 years on the lending side of JP Morgan Chase, said he didn't think the number of foreclosures had yet peaked, but the business of trying to avoid foreclosure is growing even faster than the foreclosure business.

"As the economy gets worse and the foreclosures go up," he said, "the lenders get a lot more aggressive in trying to help people with workouts, loan modifications and other things to help people keep their homes."

Lawyers represent only a fraction of Wilson & Associates' staff, which hovers in the neighborhood of 300 in recent years. Wilson-Harvey said she anticipated adding another 25 to 40 jobs in the foreseeable future.


The entire mortgage industry has some working out to do, and Harrington, whom Wilson referred to as his mentor, predicted 12-18 more months of hard labor.

"There are various messes in various parts of the country, some of which have been self-inflicted by superheated property values," he said.

And while subprime mortgages have gotten the most attention, Harrington put a big part of the blame on "exotic" mortgages, such as interest-only mortgages, and investor demand for securitized mortgage products.

"Many borrowers knowingly assumed the title 'speculator' when they took these [exotic] products," he said.

And, "The majority of mortgages that have been made over the past 15 years and especially over the past six years or so have been securitized.... It won't be the lender taking the loss at the end of the day; it will be the investors who bought those securities."

While tighter credit standards and the glut of foreclosures have pushed real estate values down--significantly in some parts of the country--Wilson said the weak dollar has kept property values from plummeting even more. But that could change as the presidential election approaches.

"One of the things that's held the value of real estate up ... has been REITs that are funded by people with international currency," Wilson said, referring to real estate investment trusts. "As we see the elections continue on, a lot of economists in the mortgage industry are predicting that the dollar will gain ground ... If the dollar gains ground as the dollars generally do before elections, you'll see less willingness for [foreign investors] to put money into real estate investment trusts."

Wilson said he wouldn't be surprised to see an internationally funded REIT collapse by August or September.

What would that mean for Wilson & Associates?

"It's unknown," Wilson said. "It depends on what Congress does."

Harrington is hoping Congress doesn't do much.

"I do think the market with take care of itself. It always has, and with minimal government intervention."

By Gwen Moritz
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Author:Moritz, Gwen
Publication:Arkansas Business
Date:Jun 9, 2008
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