Update: Biden Administration Extends Eviction and Foreclosure Moratorium, Again

Update: The Biden Administration has extended the foreclosure and eviction moratorium for homeowners with federally backed mortgages until the end of June 2021. These same homeowners have until the end of June to request mortgage payment forbearance if they haven’t already done so. The new order also allows up to an additional six months of mortgage forbearance for those who entered mortgage forbearance on or before June 30, 2020. The new order did not address extension of relief for renters.

Renters and homeowners with a federally backed mortgage who are struggling to make monthly payments can breathe easier. President Biden signed an executive order asking federal agencies to extend the moratorium on evictions and foreclosures. Originally set to expire on January 31, the relief now lasts at least another month and in some cases two months, with the possibility of more extensions. 

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Relief for renters. On September 4, 2020, the Center for Disease Control announced a nationwide halt on evictions for qualified tenants. This was originally set to expire at the of December but was then extended until January 31, 2021. Now Biden has extended it again.

To qualify, tenants must complete a CDC Eviction Declaration Form and give it to their landlord. The form certifies that you have been specifically affected by the pandemic and have exhausted all other avenues for help. There is also an income requirement. Single renters must have earned less than $99,000 ($198,000 for couples) in 2020 or received a stimulus payment. Renters also qualify if they were not required to report income in 2019 to the Internal Revenue Service.

Biden has also requested that Congress provide $30 billion in additional rental assistance. The proposal sets $25 billion aside for direct rental relief to landlords, with the other $5 billion slated to help cover energy and water costs through programs such as the Low Income Home Energy Assistance Program.

Your state may also provide rental assistance. For example, Maryland has suspended evictions for tenants that can demonstrate the pandemic has caused a severe drop in income. In Michigan, utility companies are not allowed to cut off water service until at least March 31, 2021.

Help for homeowners. Holders of  mortgages insured by the Federal Housing Administration or guaranteed by Fannie Mae and Freddie Mac are covered by the Biden administration’s extension of the moratorium on foreclosures and evictions. The foreclosure moratorium for FHA-insured single family mortgages was extended to March 31, 2021. Freddie Mac and Fannie Mae extended its moratorium on foreclosures to February 28, 2021.

The deadline to request forbearance has also been extended. Borrowers with an FHA-insured single family mortgage have until February 28, 2021, to request a forbearance in response to COVID-19.

If your mortgage is owned by a private company, check with your loan provider to see if it provides assistance. For example, Bank of America, Chase and Wells Fargo have their own payment deferral and forbearance programs. If you’re unsure of whether your loan is federally backed or not, call your mortgage servicer and ask. You can also see if Freddie Mac backs your loan at https://ww3.freddiemac.com/loanlookup, or Fannie Mae at www.knowyouroptions.com/loanlookup.

Keep in mind that these relief measures could be extended again as the pandemic continues. When the CARES Act was signed into law in March 2020, the eviction and foreclosure moratoria were slated to last only 60 days.

For more information about stimulus relief that could affect your finances, see 12 Ways the Biden Stimulus Package Could Put (or Keep) Money in Your Pocket.

Source: kiplinger.com

Mortgage industry digital strategies sag under weight of COVID-19

It’s been a complicated 12-months for the mortgage industry. Mortgage professionals working through the COVID-19 pandemic have been faced with managing a complex duality as they’ve tried to balance the opposing forces of record low interest rates and record high levels of unemployment.

On one side: a 14-year high in new home sales and a 200% annual increase in refinancing volume driving new origination into the stratosphere. On the other: a 14.7% unemployment rate pushing legions of mortgage holders to modify terms and defer payments on existing loans. In the middle: mortgage lenders — themselves displaced from their offices — trying to manage a historic surge in customer volume with digital self-service tools that, more-often-than-not, directed customers to the phone.

This is not the recipe for a world class customer experience. Quite the opposite, it is a formula for slower loan processing times, overloaded and unprofitable call centers and declines in customer loyalty and advocacy.

Missing the mark on digital

Mortgage providers have been lucky that the halo effect of ultra-low interest rates and large scale federal relief efforts have kept most customers pacified during the pandemic. But the experience should serve as a wakeup call for an industry that has struggled to keep pace when it comes to digital self-service tools that meet customer expectations and streamline operational efficiency.

It’s a trend we see clearly across our studies evaluating customer satisfaction with mortgage originators and servicers during the pandemic. On the new mortgage origination side of the equation, customer satisfaction with the competitiveness of interest was the only attribute in our study to show improvement this year. Every other factor — loan processing time, ease of self-service interaction and helpfulness of customer service — showed marked declines. The average time to close a loan refinancing transaction also rose by three days in 2020. Given the significant demands on the industry this past year, that is not a huge gap, but it does illustrate that the increased reliance on digital did not speed things up, as it should have.

Things were worse on the servicing side, where servicers struggled to meet customer demand amid rising confusion and scattered resources. In the months leading up to and during the COVID-19 pandemic, more than three-fifths (62%) of mortgage customers visited their lender’s website for information, but just 28% said they found their servicer’s website to be the most effective channel to resolve an issue. Among those who could not resolve their issue on the lender’s website, 45% said their issues were only solved after picking up the phone to speak with a representative. All told, among all customers who called their mortgage servicer for help, 19% said they struggled to get a live agent on the phone.

A new formula for the new normal

The COVID-19 experience for the mortgage industry is certainly a case study in managing a very challenging set of external variables, but it is also a sign of things to come. Research from McKinsey Digital has already found that 75% of people using digital channels for the first time during the pandemic say they will continue to use them when things return to normal. That’s a really important stat when you consider how poorly mortgage originator and servicer digital channels are performing right now.

Fortunately for the mortgage industry, there is a well-worn path of digital innovators that are proving that digital-first customer engagement can be done effectively. It’s not just Netflix and Amazon who’ve figured it out. Many of the nation’s retail banks, credit unions and direct banks have cracked the code on digital customer experience through their personal loans business lines. In fact, in our most recent analysis of consumer lending providers, we found that 34% of personal loan applications were digital-only, more than any other application channel. What’s more, the digital channel had significantly higher levels of overall customer satisfaction, outperforming face-to-face and phone-based application processes by a margin of ten points or more, on a 1,000-point scale.

What’s happening in personal loans that is not happening in traditional mortgages? The consumer lending providers are making it simple. “Two clicks or less” needs to become the mantra for the mortgage industry as it confronts the digital challenges that have kept it mired in the world of costly and cumbersome phone-based customer support. Servicers need to make basic information that is commonly searched by consumers — information on payment schedules, what to do if you can’t make a payment, information on late payments — easily accessible and complete. Originators need to make it simple to click through the application process without jumping through hoops. Then, this all needs to be tied together with frequent, proactive communication in the form of emails, text messages and updates on progress.

The industry has managed to survive one of the most difficult periods in history. If it wants to thrive, it needs to get serious about digital. Companies cannot afford to keep throwing stop-gap solutions and expensive work arounds at the problem; they need a sustainable digital formula that meets customers where they are.

Source: nationalmortgagenews.com

HUD extends COVID-19 forbearance for FHA loans

The U.S. Department of Housing and Urban Development on Tuesday extended COVID-19 foreclosure and forbearance moratoriums for FHA and USDA loans to June 30, 2021. It also extended the deadline for the first legal action and the reasonable diligence time frame to 180 days.

This announcement follows FHFA action last week to extend moratoriums for loans backed by Fannie Mae and Freddie Mac.

The measures announced by HUD today include:

  • Extending the timeframe for homeowners to request the start of a COVID-19 forbearance from their mortgage servicer through June 30, 2021.
  • Expanding the COVID-19 forbearance to allow up to two forbearance extensions of up to three months each for homeowners who requested a COVID-19 forbearance on or before June 30, 2020. These extensions are designed to provide relief to homeowners who will be nearing the end of their maximum 12-month forbearance period and have not yet stabilized their financial situation.
  • Expanding the use of FHA’s streamlined COVID-19 loss mitigation home retention and home disposition options to all homeowners who are behind on their mortgage payments by at least 90 days. This expansion will require mortgage servicers to assess more homeowners for a streamlined waterfall of loss mitigation home retention options, starting with FHA’s COVID-19 Standalone Partial Claim.

Mortgage servicers take steps to support borrowers amid COVID-19

As call volumes have spiked to a level not seen since last April, lenders and servicers need to prepare for a significant increase in their workload as they help borrowers through difficult times.

Presented by: Computershare Loan Services

“As President Biden has made clear, it is urgent that we help homeowners throughout the nation who are struggling financially from this unprecedented national emergency,” said Acting HUD Secretary Matthew Ammon. “The steps we are taking today will provide both immediate relief to those in desperate need of assistance and help more homeowners keep their homes and resume their payments when the pandemic subsides.”

Last week, the FHFA announced that borrowers with mortgages backed by Fannie Mae and Freddie Mac may be eligible for an additional forbearance extension of up to three months. FHFA forbearance plans initially had a 12 month expiration date, however, the government entity is now allowing borrowers up to 15 months of coverage.

According to the agency, eligibility for the extension is limited to borrowers who are on a COVID-19 forbearance plan as of Feb. 28, 2021. The FHFA said other limits may apply to the extension but did not provide specific detail.

Source: housingwire.com

What is mortgage loan modification, and is it a good idea?

Trouble paying your mortgage? You have options

You might be wondering about mortgage loan modification if you’re:

  • Experiencing financial hardship due to the coronavirus
  • Having trouble making your monthly mortgage payments
  • Currently in mortgage forbearance but worried about what will happen when forbearance ends

The good news is, help is available. But mortgage relief options are not one-size-fits-all.

Depending on your circumstances, you might be eligible for a loan modification. Or, you might be able to pursue another avenue like a refinance. Here’s what you should know about your options.

Check your refinance eligibility (Feb 17th, 2021)


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What is loan modification?

Loan modification is when a lender agrees to alter the terms of a homeowner’s mortgage to help them avoid default and keep their house during times of financial hardship.

The goal of a mortgage loan modification is to reduce the borrower’s payments so they can afford their loan month-to-month. This is typically done by lowering the mortgage rate or extending the loan’s repayment term.

“A mortgage loan modification does not replace your existing home loan or your lender,” explains Karen Condor, a finance and insurance expert with Loans.org.

“However, it restructures your loan in the interest of making it more manageable when you experience difficulties in making your mortgage payments.”

How mortgage loan modification works

With a loan modification, the total principal amount you owe won’t change.

“But the lender may agree to a lower interest rate, reduced loan length, or a longer payoff period,” says Elizabeth Whitman, attorney and managing member of Whitman Legal Solutions, LLC.

Any of these strategies could help reduce your monthly mortgage payments and/or the total amount of interest you pay in the long run.

Modification can also include switching from an adjustable-rate mortgage to a fixed-rate mortgage and rolling late fees into your principal, adds Condor.

Note, loan modification is intended to make a mortgage more affordable month-to-month. But it often involves extending the loan term or adding missed payments back into the loan — which may increase the total amount of interest paid.

Refinancing into a new loan, on the other hand, often reduces the monthly payment and the total interest cost.

Loan modification vs. refinance

A refinance is typically the first plan of action for homeowners who need a lower mortgage payment.

Refinancing can replace your original loan with a new one that has a lower interest rate and/or a longer term. This may offer a permanent reduction in mortgage loan payments without negatively affecting your credit.

However, borrowers going through financial hardship might not be able to refinance.

They may have trouble qualifying for the new loan due to a reduced income, lower credit score, or unexpected debts (such as medical expenses).

In these cases, the homeowner might be eligible for a mortgage loan modification.

Loan modification is usually reserved for homeowners who are not eligible to refinance due to a financial hardship.

Mortgage modification is usually reserved for borrowers who do not qualify for a refinance and have exhausted other possible mortgage relief options.

“With a loan modification, you work with your existing bank or lender on modifying the terms of your existing mortgage,” explains David Merritt, a consumer finance litigation attorney with Bernkopf Goodman, LLP.

“If you’ve defaulted on your existing mortgage, chances are your credit has been negatively impacted to the point where a new lender would be wary to give you a new loan.”

“Typically a refinance is not possible in this situation,” says Merritt.

That means there’s no real contest between loan modification vs. refinancing. The right option for you will depend on the status of your current loan, your personal finances, and what your mortgage lender agrees to.

Check your refinance eligibility (Feb 17th, 2021)

Loan modification vs. forbearance

Forbearance is another way servicers can help borrowers during times of financial stress.

Loan forbearance is a temporary plan that pauses mortgage payments while a homeowner gets back on their feet.

For example, many homeowners who lost their jobs or had reduced income were able to request forbearance for up to a year or more during the COVID pandemic.

Unlike forbearance, mortgage loan modification is a permanent plan that changes the rate or terms of a home loan.

Forbearance and loan modification can sometimes be combined to make a more effective mortgage relief plan.

For instance, a homeowner whose income is still reduced at the end of their forbearance period may be approved for a permanent loan modification.

Or, a homeowner approved for mortgage modification may also have part of their unpaid principal forborne (put off) until the end of the repayment period.

Who is eligible for a loan modification?

To qualify for a loan modification, a borrower usually must have missed at least 3 mortgage payments and be in default.

“Sometimes, a borrower who has experienced financial setbacks, which makes a default imminent, can qualify for a loan modification. But not everyone in default under their mortgage is eligible for a loan modification,” explains Whitman.

“Borrowers whose financial setback is so severe that they will never be able to repay their mortgage won’t receive a modification, nor will borrowers who have the ability to make mortgage payments either from their income or savings.”

“Borrowers whose financial setback is so severe that they will never be able to repay their mortgage won’t receive a modification” –Elizabeth Whitman, attorney & managing member, Whitman Legal Solutions, LLC

In addition to providing a hardship letter or statement, prepare to provide proof of income, two years’ worth of tax returns, and bank/financial statements, says Condor.

Be aware, however, that your lender is not obligated to provide a loan modification.

“Once a lender has an executed contract — meaning the loan — they don’t have to change it. Many [homeowners] are denied a mortgage loan modification,” Gallagher explains.

“If the lender desires to modify the terms, per your request, then you have a starting point.”

How to request a loan modification

The process for requesting a loan modification will vary depending on who manages your loan.

The first thing you need to do is contact your loan servicer. This is the company to which you send payments, and the one you need to work with to determine your options for loan modification.

Some mortgages are managed, or “serviced” by the original lender. But most home loans are serviced by a separate company.

For instance, you may have received the loan from Wells Fargo, but now make payments to U.S. Bank.

The loan servicer is the company that takes your monthly mortgage payments; you can find yours by checking the name and contact information on your latest mortgage statement.

Many borrowers begin the process by sending a ‘hardship letter’ to their servicer or lender. A hardship letter is simply a note that describes the borrower’s financial difficulties and explains why they can’t make payments.

The lender will likely request financial information and documentation, including bank statements, pay stubs, and proof of your assets.

These documents will help your lender understand the full scope of your personal finances and determine the correct path for mortgage relief.

Mortgage loan modification programs

Your loan modification options will depend on the type of loan you have and what your lender or loan servicer agrees to.

Conventional loan modification

“Fannie Mae, Freddie Mac, and private lenders of conventional loans have their own modification programs and guidelines,” says Charles Gallagher, a real estate attorney.

In particular, Freddie Mac and Fannie Mae offer Flex Modification programs designed to decrease a qualified borrower’s mortgage payment by about 20%.

Flex Modification typically involves adjusting the interest rate, forbearing a portion of the principal balance, or extending the loan’s term to make monthly payments more affordable for the homeowner.

To be eligible for a Flex Modification program, the homeowner must have:

  • At least 3 monthly payments past due on a primary residence, second home, or investment property
  • Or; less than 3 monthly payments past due but the loan is in “imminent default,” meaning the lender has determined the loan will definitely default without modification. This is only an option for primary residences

Certain hardships can trigger “imminent default” status; for instance, the death of a primary wage earner in the household, or serious illness or disability of the borrower.

Unemployment is typically not an eligible reason for Flex Modification.

Borrowers who are unemployed are more likely to be placed in a temporary forbearance plan — which pauses payments for a set period of time, but does not permanently change the loan’s term or interest rate.

In addition, government-backed FHA, VA, and USDA loans are not eligible for Flex Modification programs.

FHA loan modification

The Federal Housing Administration offers its own loan modification options to make payments more manageable for delinquent borrowers.

Depending on your situation, FHA loan modification options may include:

  • Lowering the interest rate
  • Extending the loan term
  • Rolling unpaid principal, interest, or loan costs back into the loan’s balance
  • Re-amortizing the mortgage to help the borrower make up missed payments

In some cases where extra assistance is needed, FHA borrowers may be eligible for the FHA-Home Affordable Modification Program (FHA-HAMP).

FHA-HAMP allows the lender to defer missed mortgage payments to bring the homeowner’s loan current. It can then request that HUD (FHA’s overseer) further reduce the monthly payment by opening an interest-free subordinate loan of up to 30% of the remaining loan balance. The borrower only pays principal and interest based on 70% of the balance, and can pay back the remainder upon a sale or refinance of the home.

Deferring this extra principal amount can help make it easier for FHA borrowers to get back on track with their loans.

FHA-HAMP is typically combined with one of the loan modification methods above to lower the borrower’s monthly payment.

Eligible FHA borrowers must complete a trial repayment plan to qualify for either loan modification or the FHA-HAMP program. This involves making on-time payments in the modified amount for 3 months straight.

VA loan modification

Veterans and service members with loans backed by the Department of Veterans Affairs can ask their servicer about VA loan modification.

VA loan modification can roll missed payments back into the loan balance, as well as other delinquent homeownership costs like unpaid property taxes and homeowners insurance.

After these costs are added to the loan, the borrower and servicer work together to establish a new repayment schedule that will be manageable for the veteran.

Note, VA modification is unique in that the interest rate might actually increase. So while this plan can help veterans bring their loans current, it won’t always reduce the homeowner’s monthly payments.

“For VA loan modification, several requirements apply,” notes Condor. She explains:

  • “Your VA loan must in default
  • You must have since recovered from the temporary hardship that caused the default
  • You must be able to support the financial obligations of the modified VA loan
  • And you must not have modified your VA loan in the past three years”

Some homeowners with VA loans may qualify for a ‘Streamline Modification.’

Streamline Modification does not require as much documentation as the traditional VA modification plan, but includes two extra requirements:

  • The combined principal and interest payment must drop by at least 10%
  • The borrower must complete a 3-month trial repayment plan to prove they can make the modified payments

Talk to your loan servicer about options for your VA loan.

USDA loan modification

USDA loan modification is for homeowners whose current loans are backed by the U.S. Department of Agriculture.

A USDA loan modification allows missing mortgage payments (including principal, interest, taxes, and insurance) to be rolled back into the loan balance.

USDA modification plans also allow a term extension up to 480 months, or 40 years total, to help reduce the borrower’s payments. And the servicer can lower the borrower’s interest rate, “even below the market rate if necessary,” according to USDA.

Servicers may cover up to 30 percent of the homeowner’s unpaid principal balance using a mortgage recovery advance.

Contact your loan servicer to find out whether you’re eligible for a USDA loan modification.

Is mortgage loan modification a good idea?

A mortgage loan modification is worth pursuing for the right candidates.

“A modification can give you a second bite at the apple and get you out of the default or foreclosure process, allowing you a chance to remain in your home,” says Merritt.

But caveats apply.

“Typically, a modification will take all of your missed payments and add those to the outstanding principal balance,” Merritt says.

Say your current mortgage has an outstanding balance of $300,000. Assume you missed $50,000 in payments. In this example, your modified balance would be $350,000, which is called ‘capitalization.’

“But imagine your home’s value is only $310,000,” adds Merritt. “Here, a modification would allow you to stay in your home and avoid foreclosure, but you would owe more than your house is worth. That would be a problem if, say, two years after modification you wanted to sell your home.”

Refinancing and other alternatives to modification

Loan modification isn’t your only option, thankfully.

Possible alternatives include refinancing, forbearance, a deed-in-lieu of foreclosure, or Chapter 13 bankruptcy.

Refinancing

As mentioned above, you should first check if you’re eligible to lower your interest rate and payment with a mortgage refinance.

You’ll have to qualify for the new mortgage based on your:

  • Credit score and credit report
  • Debt-to-income ratio
  • Loan-to-value ratio (your loan balance versus the home’s value)
  • Income and employment

It may be difficult to qualify for a refinance during times of financial hardship. But before writing this strategy off, check all the loan options available.

For instance, FHA loans have lower credit score requirements and allow higher debt-to-income (DTI) ratios than conventional loans. So it may be easier to refinance into an FHA loan than a conventional one.

Streamline refinancing

Homeowners with FHA, VA, and USDA loans have an additional option in the form of Streamline Refinancing.

A Streamline Refinance typically does not require income or employment verification, or a new home appraisal. Even the credit check might be waived (though the lender will always verify you have been making mortgage payments on time).

These loans are a lot more forgiving for homeowners whose finances have taken a downturn.

Note, Streamline Refinancing is only allowed within the same loan program: FHA-to-FHA, VA-to-VA, or USDA-to-USDA.

Check your Streamline Refi eligibility (Feb 17th, 2021)

Other mortgage relief options

Refinancing typically requires a loan-to-value ratio of 97% or lower, meaning the homeowner has at least 3% equity.

However, “borrowers who have less than 3 percent equity in their homes may qualify for Fannie Mae’s HIRO program,” suggests Whitman.

This ‘High-LTV Refinance Option‘ is intended for homeowners with Fannie Mae-backed loans who owe more on their mortgage than the property is worth.

“Other choices for borrowers with little or no equity in their homes include a consensual foreclosure or a short sale, which involves selling the property for less than the outstanding mortgage amount.”

What should you do?

Whitman continues, “Any borrower who will struggle to repay their mortgage and other debts after a loan modification should consider whether it is better to dispose of their home and find a more affordable housing option.”

To better determine if a refinance or mortgage loan modification is the right strategy for you, consult with your loan servicer, an attorney, or a housing counselor.

Mortgage loan modification FAQ

What happens when you get a loan modification?

The goal of a loan modification is to help a homeowner catch up on missed mortgage payments and avoid foreclosure. If your servicer or lender agrees to a mortgage loan modification, it may result in lowering your monthly payment, extending or shortening your loan’s term, or decreasing the interest rate you pay.

How do I get a mortgage loan modification?

Contact your mortgage servicer or lender immediately to alert them of your financial hardship and ask about loan modification options available. Be ready to provide all documentation requested, which can include financial statements, pay stubs, tax returns, and more.

How long does loan modification last?

Expect your loan modification process to take anywhere from one to three months, according to finance and insurance expert Karen Condor. Once your loan modification has been approved, the changes to your interest rate and/or loan terms are permanent.

Does loan modification hurt your credit?

A mortgage loan modification under certain government programs will not affect your credit. “But other loan modifications may negatively impact your credit and show up on your credit report. However, since your mortgage usually must be in default to request a modification, your financial difficulties are probably already on your credit report,” explains attorney Elizabeth Whitman.

Can you be denied a loan modification?

Yes. A mortgage loan is a contract, and the mortgage lender isn’t obligated to agree to a loan modification. “Borrowers whose financial situation is such that they will never be able to repay their mortgage loan, as well as borrowers who do not cooperate with lender requests, are likely to be denied a modification,” says Whitman.

How much does mortgage modification cost?

While there are no closing costs for a mortgage modification, your lender may charge a processing fee. “If your modification involves extending your loan’s term, that means you’ll pay more interest over the life of your loan,” explains attorney Charles Gallagher.

Do you have to pay back a loan modification?

Paying back a loan modification will depend on the type of modification you are given. “Your lender can apply a reduced interest amount to your loan’s principal on the backend that you must later pay back,” says Condor. “With a principal deferral loan modification, your lender reduces the amount of principal paid off with each payment. But the amount of principal your lender deferred will be due when your loan matures or the home is sold.”

Understand your options

Mortgage loan modification is typically reserved for homeowners who are already delinquent on their loans.

If you’re worried about mortgage payments, get ahead of the issue by checking your eligibility for a refinance or contacting your loan servicer about options before your loan becomes delinquent.

Many homeowners are facing financial hardship right now, and many lenders and loan servicers are willing to help. But help is only available to those who ask for it.

Verify your new rate (Feb 17th, 2021)

Source: themortgagereports.com

CFPB makes it clear: fair servicing is back, for real this time

A new presidential administration and a clarion call from the Consumer Financial Protection Bureau has transformed fair servicing from a seemingly remote risk into a front and center mandate.

After the 2008 financial crisis, regulators enhanced long-standing fair lending examination guidelines to incorporate the concept of fair servicing. They began to scrutinize potential discriminatory loss mitigation and foreclosure practices and threatened to hold mortgage servicers accountable if such impermissible practices were identified.

Mortgage servicers prepared for the scrutiny, conducted fair servicing risk assessments, and brought in the quants to analyze their servicing portfolio for risk of disparate treatment and disparate impact — but the big discrimination actions did not follow.

Today’s regulatory environment feels different as COVID-19 has struck communities of color harder than others and equity and inclusion are at the heart of the Biden administration’s financial oversight initiatives. Whereas in the past it may have been acceptable for servicers to treat all borrowers uniformly, today, servicers are being pushed to double-down on active outreach.

Accordingly, it is crucial to refresh that fair servicing policy and create a fair servicing program, with attendant procedures, that reflects the environmental moment.


Honest Conversations — a podcast on minority homeownership

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Biden Means Business

On Jan. 26, President Biden signed an executive order committing to revitalize enforcement of fair lending laws to address the “ongoing legacies of residential segregation and discrimination [that] remain ever-present in our society.” The order pointed to the current racial gap in homeownership and the persistent undervaluation of properties owned by families of color as two such legacies.

Two days later, Acting CFPB Director Dave Uejio told staff the bureau’s twin priorities were protecting consumers facing financial hardship due to COVID-19 and racial equity.

This announcement promised additional supervisory and enforcement resources to ensure a “healthy docket intended to address racial equity.” It was accompanied by criticisms of mortgage servicer performance during the pandemic (even as servicers themselves disrupted by COVID-19 moved to remote operations and quickly began implementing new procedures to comply with a wave of requirements from regulators, legislators, and investors).

So What’s a Servicer to Do?

To be sure, mortgage servicers did not get a pass after the last financial crisis; the hammer dropped, but through a different legal vehicle. Regulators relied not on antidiscrimination laws, but on their sweeping authority to prohibit unfair and deceptive acts and practices to attack loss mitigation and foreclosure activities.

In so doing, the population of consumers who became focal points was broader, encompassing both members of protected classes and many others who were financially vulnerable.

Today’s cultural moment is potentially different than it was 10 years ago, and it is anticipated regulators will deploy the Equal Credit Opportunity Act and Fair Housing Act, and even state anti-discrimination laws, in novel ways to nudge servicers to do their part to support the equity agenda.

To that end, mortgage servicers should:

  • Clearly define the commitment to serving borrowers in a fair and equitable way. A clear fair servicing policy setting forth the expectations of the board, or management, is a must, ideally accompanied by a written fair servicing program detailing roles, responsibilities, and controls. Off-the-shelf training reciting the basics of ECOA, the FHA, and other anti-discrimination laws may check the box, but consider whether you’ll be proud showing that to the regulator when asked for your fair servicing training materials.
  • Confirm the sufficiency of outreach. At least one study has shown that borrowers in regions with a higher likelihood of COVID-19-related economic shocks and minority populations were more likely to obtain debt relief, but such results may not be sufficient to quell previously expressed policymaker concerns that investor and agency response has been insufficient to assist minority communities. The CARES Act forbearance requirements eliminated discretion regarding whether to offer forbearance, and on what terms, but servicers will undoubtedly be called upon to demonstrate that they engaged in sufficient outreach to offer borrowers of all races and ethnicities appropriate loss mitigation.
  • Lock in your LEP strategy. On her way out the door, former CFPB Director Kraninger issued guidance on how financial institutions should engage the millions of U.S. consumers for whom English is a second language. The challenge is significant, given the complexities inherent to explaining mortgage servicing, but servicers who have not thought through the process do so at their own peril, and will no doubt be called to account for a lack of preparation.
  • Document the great service you offered borrowers before making that referral to foreclosure. Hopefully a foreclosure tsunami like the one that hit during the last financial crisis can be avoided, but a backlog will surface given that foreclosures have essentially been frozen for almost a year. A good pre-referral checklist that documents outreach, consideration for a range of loss-mitigation options, and satisfaction of borrower concerns, will be critical for those called on to demonstrate to regulators their equitable treatment of borrowers. Servicers with sufficient account volume may also benefit from conducting fair lending statistical analytics regarding assistance and loss mitigation outcomes.

Mortgage servicers tend to focus on the detailed operational and technical challenges associated with regulatory requirements. Compliance with fair lending laws requires a different mindset — one that mortgage originators have long dealt with, but one that may be new to servicing operations. 

The Biden administration has made clear it will chart a course quite unlike its predecessor, and concerns over equity are likely to require servicers to build, or at least enhance, the many components of a fair servicing program.

This column does not necessarily reflect the opinion of HousingWire’s editorial department and its owners.

To contact the editor responsible for this story:
Sarah Wheeler at swheeler@housingwire.com

Source: housingwire.com

Digital Mortgage Servicer Brace Nabs $15.7M in Funding

Mortgage fintech Brace has announced $15.7 million in Series B funding. So reports Crowdfund Insider.

The company says it “is developing a full suite of digital solutions to service non-performing mortgage loans.”

The funding round was led by Canvas Ventures and follows a $10 million Series A round in 2020.

Read the full article from Crowdfund Insider.

Source: themortgageleader.com

HUD extends waivers for FHA reverse mortgages

In a bid to aid borrowers, the Department of Housing and Urban Development announced on Wednesday a series of temporary waivers that will allow servicers to use alternative methods when servicing FHA-insured forward and reverse mortgages.

Rather than conducting face-to-face interviews, HUD’s waiver will allow substitute methods for servicers to conduct borrower interviews for FHA-insured forward and reverse mortgages when performing early default interventions, specifically for borrowers in danger of foreclosure.

Alternative methods HUD listed included phone interviews, video calling services and other conference technology.

HUD also said it is waiving the $5,000 property charge payment arrearages cap for reverse mortgage borrowers who are behind on payments.

Under existing policy, when a borrower fails to make two consecutive payments on a HECM repayment plan, the plan fails and servicers may only offer the borrower a new repayment plan if the borrower’s total arrearage is less than $5,000. The new waiver will allow servicers to evaluate impacted borrowers regardless of how far behind they are.


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HUD will also waive the requirement for servicers to obtain a signature on an occupancy certification from a HECM borrower. While HUD requires mortgagees must continue to obtain the HECM borrower’s annual certification, the physical signature requirement is temporarily eliminated.

“President Biden has made it clear that protecting the health, safety, and homeownership security of the nation’s most vulnerable populations, including seniors, are urgent and immediate priorities,” said acting HUD secretary, Matthew Ammon. “The policy waivers issued today are another important step in addressing these priorities.”

HUD had previously released several variations of these waivers originally announced on Dec. 17, 2020 but were set to expire Feb. 28, 2021. However, with no clear route of the virus and the deployment of a vaccine, this latest set of temporary waivers is not set to runout until Dec. 31, 2021.

According to a release, the agency hopes to align these waivers with President Biden’s “Day One” request to provide aid to homeowners struggling from COVID-19. Prior to that request, the FHA extended its foreclosure and eviction moratorium for borrowers with FHA-insured single family mortgages through March 31, 2021.

FHA also extended the deadline for borrowers financially impacted by COVID-19 to request a new forbearance from their mortgage servicer through March 31, 2021.

Source: housingwire.com

IMF: CFPB mortgage servicer complaints drop in Q4

Mortgage servicers received less complaints at the Consumer Financial Protection Bureau (CFPB) in the fourth quarter of 2020, according to data from Inside Mortgage Finance.

The data showed that mortgage protests overall decreased by 6.7% in the fourth quarter, while complaints about loan modifications dropped 10.1%, servicing concerns dropped 6.7% and criticisms about applications fell 8.6%.

But while these complaints were down for the final quarter of the year, overall in 2020, the CFPB saw an increase of 8.2% in mortgage-related complaints.

This revelation comes after the CFPB’s new Acting Director Dave Uejio promised swift action against mortgage servicers in an upcoming regulatory crackdown. Uejio told CFPB staff in an email that the bureau will direct its attention to mortgage servicers, promising “aggressive action” to ensure companies follow the law.

The greatest areas of concern for Uejio surrounded servicers’ handling of CARES Act forbearances such as failing to process accounts or providing homeowners with incorrect or incomplete information.


Mortgage servicers take steps to support borrowers amid COVID-19

As call volumes have spiked to a level not seen since last April, lenders and servicers need to prepare for a significant increase in their workload as they help borrowers through difficult times.

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But this comes in direct contrast to another government agency’s view. In October 2020 at the Mortgage Bankers Association Annual convention, Federal Housing Finance Agency Director Mark Calabria took the opportunity to recognize the effort servicers were making to help borrowers in forbearance and even thanked them.

And this week, the FHFA touted its accomplishments under the CARES Act, pointing out the low levels of foreclosures and delinquencies. In its blog, the FHFA said the CARES Act provided an option for homeowners with federally backed mortgages to request forbearance for up to 180 days, but said that even borrowers of non-covered mortgages were offered a similar option from their servicers.

The FHFA stated that while the true effects of the CARES Act may not be fully known for months to come, clearly borrowers saw a benefit as evidenced by the low level of delinquencies on credit reports.

“During 2020, mortgages reported to the credit bureaus as having payments 30 or 60 days past due plunged to 1%,” the FHFA states. “The percentages over the past year for mortgages that were 90 to 180 days past due (0.6 %) and mortgages in the process of foreclosure, bankruptcy or deed-in-lieu (0.3 %) remained flat.  As a result of these trends, the median credit score of mortgage borrowers, as measured by VantageScore on borrowers of active mortgage loans, has actually risen slightly in 2020. In contrast, the share of accounts that were reported as more seriously past-due rose sharply in 2009 after the Great Recession and consumer credit scores also suffered.”

Source: housingwire.com