Mortgage servicers and attorneys are preparing for regulators to start looking more closely at borrowers exiting pandemic-related payment suspensions, following the confirmation of the Consumer Financial Protection Bureau’s
That was the general consensus of a panel on post-forbearance outcomes at the Mortgage Bankers Association’s annual conference on Oct. 18, which explored some of the complexities in this area that lie ahead for them and what can be done to address them.
Taking a fair, consistent and customer-centric approach alone is one thing might go a long way toward ensuring a company doesn’t have the kind of poor peer-group
“If you are a servicer and the only reason you are doing things is that you don’t want to get punished by the CFPB, you’re not going to end up doing well,” he said. “If you are doing these things because it’s the right thing to do, that changes the whole motivation of your company and how you implement some of these programs, and you are going to end up in a good spot.”
Offering an online program that walks customers through loss-mitigation choices was a strategy Kwasny said has worked for his company to date. The program was offered online on a self serve basis and in conjunction with inquiries made to the call center.
Because forbearance rates have gotten fairly low, and so far the largest category of loss mitigation has been borrowers who tack missed payments onto the end of their loans and resume regular ones as intended, servicers are hoping regulators will be relatively pleased with outcomes, with perhaps one exception.
Overall, just 2.28% of all loans were in forbearance between Oct. 4 and 10, the most recent period tracked by the MBA. Of those, 28.9% chose what’s known as the
The third largest group, the 16.7% of borrowers who exited and remained delinquent without any subsequent form of assistance, is likely the group that the CFPB will watch most closely.
Other regulatory nuances servicers may want to be aware of include the fact that they may not be able to count on the leniency regulators said they would offer early in the pandemic related to contingencies like work from home arrangements, said Nanci Weissgold, co-chair, financial services and products group and co-leader of the Consumer Financial Services Team at Alston & Bird LLP.
“Will that be able to continue for the [mortgage loan officers] that need to be licensed to provide loan modifications? I think a lot of issues are still outstanding,” she said (Modifications are adjustments of mortgage terms sometimes made to payments in order to make them more affordable in some instances when a hardship has a permanent impact on income.)
Another outstanding issue for servicers as they handle the transition to loss mitigation will be the
“Treasury has not yet approved any plans, so I don’t think we’re going to start seeing it until Jan. 1, and then servicers have to decide if they want to participate,” Weissgold said.
HAF, which the states determine borrower eligibility for, may not be easy for servicers to participate in because it will likely involve navigating what could be a patchwork of different agreements with many different jurisdictions, she noted.
“There’s been one model form that’s been floating around, but not every state may use it or may have an addendum to it that’s different,” she said. “I think it’s going to be a challenge for servicers to work with all the states.”
However, she advised servicers to think twice about declining to participate in a relief effort that’s aimed at helping lower-income borrowers with pandemic-related hardships.
“You are going to have to [weigh] the operational risk of standing up another whole program vs. the reputational risks if you don’t participate,” she said.
