Mortgage companies should be actively involved in the distribution of money from the Treasury’s Homeowner Assistance Fund to successfully help borrowers, a former housing official urged during a virtual event on Thursday.
While the states are the ones actually responsible for making the payments, HAF’s effectiveness hinges on how it affects loan outcomes, Brian Montgomery, former deputy secretary at the Department of Housing and Urban Development, said during the Padgett Law Group’s panel discussion.
Therefore, it "will not be successful without the participation of servicers,” said Montgomery, who is currently the chairman and founder of Gate House Strategies.
Mortgage firms are understandably skittish about adding responsibilities related to another government program at the same time they’re retooling processes in preparation for the
Servicers generally calculate what loss mitigation options are available for distressed borrowers with expiring pandemic-related payment suspensions based on available funds. So the question of whether or not HAF money is coming could play a role in the fate of 1.86 million borrowers who have forborne payments. The majority of the homeowners involved have government-related loans, according to Black Knight. These include mortgages from government-sponsored enterprises Fannie Mae and Freddie Mac, and loans insured by the Federal Housing Administration or guaranteed by the Department of Veterans Affairs. A smaller share of private loans are held in bank portfolios or part of private-label securitizations.
The states have until July 31, when the moratorium ceases, to organize their plans for HAF distribution, with some having complex criteria involving trial periods and re-applications for additional funds earmarked for low- and moderate-income borrowers. Trying to figure out loss mitigation calculations with that money in flux could be an “organizational nightmare,” said Candace Rusell, vice president of Carrington Mortgage Services.
However, the states are making an effort to develop a uniform application so consistent processes could develop over time, said Faith Schwartz, founder and CEO of Housing Finance Strategies.
“There is a little bit of chaos out there, but there [also] is a little bit of alignment coming into place,” she said.
