Fannie Mae said that the standardization of servicing
standards that followed the 2008 housing crisis appears to have helped the
industry manage the recent flood of COVID-19 forbearance plans. The company included
a series of questions about forbearance management in its September Lender
Sentiment Survey and has now released a special report on the responses.
Servicers had to move quickly to implement the forbearance
programs, which were first announced by the GSEs Fannie Mae and Freddie Mac and
by FHA but were then expanded and mandated by Congress under the CARES Act.
They also had to manage the loans in forbearance, continue remittances to
investors, and make insurance and tax payments out of escrow accounts. As the plans
had three-month terms, borrowers had to be contacted to do renewals or to implement
loan modifications or other exit strategies.
In its survey Fannie Mae asked questions to clarify the challenges
servicers faced with the forbearances. It also asked executives who worked in
mortgage servicing during the 2008 housing crisis to assess, separately, what
aspects of servicing they found more challenging and less challenging compared
to that experience.
According to the report, the leading challenges identified
by servicers were: “1) keeping up with policy changes from investors; 2)
customer-facing staffing capacity; and 3) training the customer-facing staff to
provide guidance to homeowners on mortgage relief and loss mitigation options.”
Technology and the process for homeowners to request assistance were much less
of a concern. Nearly 70 percent of mortgage servicers said they had a website
with mortgage relief information and payment assistance requests and nearly 60
percent reported that the website helped reduce forbearance related call center
The biggest challenges of interacting with homeowners, were:
1) explaining clearly to homeowners what their options were for repayment after
forbearance; 2) explaining clearly to homeowners the potential implications of
taking a forbearance plan; and 3) periodically checking in with homeowners to
see if they were ready to exit forbearance.
A plurality of those respondents who had servicing
experience in 2008 found the recent situation to be less challenging, including
data and technology related standards, the process by which homeowners
requested assistance and more generally “helping homeowners overcome hardship
and stay in their homes.” The one area in which respondents said it was more
challenging in 2020 regarded “keeping up with policy changes from investors.“
Fannie Mae conclude that common standards in servicing practices established
after the housing crisis provided the foundation for minimum borrower outreach expectations.
While the standards played an important role in providing the industry a leg-up
during this crisis, it was widely recognized among servicers that the
challenges faced this year required a different response.
Even though the sudden surge of demand for
mortgage assistance has receded, many borrowers are still in need of help in accessing
the relief and loss mitigation options available. Servicers are prioritizing
the need for a timely response and for communicating clearly with borrowers. Fannie
Mae says that more fully coordinated efforts to align policy and direction
across the industry can help servicers respond to the current crisis and future
crises with even greater effectiveness.