The recent DS News Webinar, “Forbearance Agreements: One Year Later-What Now?” took a closer look at the impact on the servicing industry when government-mandated regulations on foreclosures are finally lifted.
Moderated by Treliant LLC’s Senior Directors Deborah J. Grissom and Ellen Rose, panelists who shared their thoughts included Bob Caruso, President & CEO of ServiceMac LLC; John Dunnery, VP, Government Loan Servicing for Community Loan Servicing LLC; and Brent Potter, Senior Managing Director–Default Operations for Homepoint Financial.
The Coronavirus Aid, Relief, and Economic Security (CARES) Act (2020)—passed by Congress on March 25, 2020 and signed into law just two days later—and the Coronavirus Response and Consolidated Appropriations Act (2021) provided economic assistance for American workers, families, small businesses, and industries at the onset of the COVID-19 pandemic. The Consolidated Appropriations Act continued many of the programs introduced by the CARES Act by adding new phases, new allocations, and new guidance to address issues related to the continuation of the COVID-19 pandemic.
“We have all kinds of groups that are now impacting us,” said Dunnery of the ripple effect COVID has had on the servicing community. “It’s not just Congress with the CARES Act, its executive orders and presidential announcements that extend both the forbearance and the foreclosure moratoriums. We have the CDC [Center for Disease Control and Prevention] involved with regard to extending evictions … so we have multiple regulators now involved impacting the servicing world.”
One key for servicers over the past year has been keeping consumers informed of their options when seeking forbearance plans. It has fallen upon the shoulders of those in the servicing industry to juggle the many changes that have been passed in Congress and otherwise to properly guide consumers on the best route to take.
“It’s hard to predict what this set of borrowers is going to do,” said Grissom. “Their set of circumstances is so different from what we experienced in the past.”
“We are doing the typical phone calls, letters and e-mails, and are not using chat at the moment. When customers were calling in and asking for forbearance, we elected to do something a little different in that we automated the back end of our process and forced our customers to talk to us before we give them forbearance just so that we can educate them on what an agreement is and what we knew, at that time, the pros and cons of that agreement,” said Caruso. “Part of that process has allowed us to have a lower overall forbearance rate. I think the industry shows forbearances at about 5% right now, we are at about 1.5% overall, with approximately 25% of those customers current on their loans.”
As the servicing industry keeps open the lines of communication with its customer base, arming the consumer with proper coaching points is a step in the right direction to keep people in their homes. Many of these homeowners who lost their jobs are in this spot for the very first time and its vital that servicers painstakingly guide them through this time.
“Based off the last recession, servicers just don’t get any credit,” said Caruso. “We are being extra diligent to make sure that we are ready for when we are being reviewed and audited in a very detailed way.”
July 1, 2021 is the date foreclosure moratoria are expected to expire, and servicers must brace for what may be unprecedented levels of volume. The Consumer Financial Protection Bureau (CFPB) recently issued warnings to servicers to prep this surge, and servicers are heeding the call by adapting and adopting new methods to supplement their business.
As explained by Potter, despite the advances in fintech, nothing replaces a basic person-to-person conversation to break down the options available to a customer in their time of duress.
“Going into this a year ago, a lot of servicers thought we would be able to lean on web-based tools more than we can,” said Potter. “What we have learned is that customers want to speak to somebody when they are making these decisions, and when its time to come off a forbearance and consider what is next for them, their family and their household, they need to speak to someone. They need to be able to have a conversation and understand the facts and what it means to them on a one-to-one scale versus a broad spectrum. What we found is that you can’t replace the value of that conversation.”
There was concern among the panelists that those who have requested forbearance, were not using the funds in a proper manner in the sense to upkeep their property. This scenario would have a ripple effect, as unkempt homes in neighborhoods drives down property values.
“I think we have to be careful to assume that there is all this equity out there,” said Potter. “These customers that stay in forbearance for 18 months or longer likely will be the ones who are not using the funds to keep their house up at times. When you look across the neighborhood they may be in, there is a good chance it may not be the nicest home in the neighborhood. When you go to sell that property, the market value in that area may not represent the true value of the home.”
The servicing industry is primed and ready for the expiration of foreclosure moratoria. The methods in place and new tech being developed will support a number of new issues faced for the very first time by borrowers in unique situations.
“It’s a different reaction than the 2008 crisis where I think many servicers compartmentalized almost everything into small bits and pieces because of the fear of the regulators coming in,” said Dunnery. “These walls are being broken down and now we are getting into how we train people to be aware of how we service a loan across a default, and across a forbearance period.”
It will be all hands on deck come June 30, 2021, as the servicing industry works hand in hand to keep at-risk borrowers in their homes once the moratoria are lifted.