Servicers' partial waiver for face-to-face meetings nearing expiration

A Federal Housing Administration requirement for servicers to make face-to-face contact with mortgage borrowers who are in default may be reimposed after its partial waiver due to the pandemic, which has been extended multiple times.

At the time of this writing, it appeared the Department of Housing and Urban Development was maintaining a Dec. 31 expiration date for the temporary measure, which has allowed mortgage companies to use alternative methods for outreach like phone interviews, video calling or email.

HUD first initiated the partial waiver in March 2020 with the intent of having it expire after a year. Instead, it was extended to December 2021, and then for another year. 

If this winter's increase in COVID-19 and other respiratory infections, or other factors, don't lead to a third extension — and HUD doesn't decide to otherwise change its original policy — the waiver's expiration could create more demand for in-person outreach.

While some have debated whether the digital alternatives used during the pandemic would remove the need for manual processes, vendors who provide in-person outreach say servicers are still voluntarily using it for some tasks and they believe it's likely to persist in some form.

"I don't know if this waiver is going to continue, what I do know is that I continue to do face-to-face outreach for lenders and servicers," said Matthew Preuss, president of NCCI, formerly known as the National Creditors Connection Inc.

Preuss said NCCI has gotten "steady" demand for its door-knock services recently, driven in part by interest in outreach to borrowers exiting forbearance for the last 18 months. Servicers have been reporting that some of these borrowers have begun "ghosting" them.

"Most people want to ignore their problems. So it's not like a servicer's not trying to get a hold of a customer. They're sending letters, they make phone calls but it's very easy in this world to ignore things," Preuss said. "So what we do is extend an olive branch that re-engages them and humanizes the situation, because it's a person trying to reach out."

Pundits generally foresee ongoing need for borrower outreach efforts in the post-pandemic era that may be in person, but they have suggested that officials may want to use the temporary departure from traditional practices during the pandemic as an opportunity to make improvements.

Providing more information on what to do in an event of a mortgage hardship before it happens would be a key improvement, said Vanessa Gail Perry, a professor at George Washington School of Business. Research on consumer decisions shows that a crisis "is actually the worst time to evaluate new information," she said during a recent Urban Institute online event on the future of loss mitigation. Borrowers could get a standard warning upfront when getting loans, similar to the airline crew's explanation of what to do in the event of an emergency at the start of every flight, she said.

"We need better outreach that is ongoing, repeated, targeted, and that is deliberate," said Perry.

However, she acknowledged that standardized borrower outreach isn't always the best approach, suggesting that some degree of personal and flexible communication should continue.

"There are a lot of borrowers, particularly in communities of color, but across the spectrum who are just distrustful of their servicers, who find the scripts that they often encounter when they talk to servicers to just be sort of impenetrable," said Perry.

Borrowers "need somebody who's going to be able to sit down and look at their situation holistically, talk through the specific realities of their situation so that they can make informed choices," she said, suggesting that servicers lean on housing counselors to help with this task.