Digitizing Mortgage Default
The Federal Housing Administration (FHA) is looking to modernize mortgage default servicing processes by inviting more automation into the process...
Will higher interest rates put your delinquent borrowers in jeopardy? Pushed to new lows on the cusp of the financial crisis, the average annual interest rate for mortgages stayed under five percent for 12 years, lasting from 2010 until 2022, when the average annual rate climbed to 5.53 percent. Rising above seven percent in October of 2022 and then above eight percent in October of 2023, where do we sit today? Amidst mixed predictions for the continued direction of interest rates, Bankrate clocked the average interest rate for April of 2024 at 7.05 percent. With the vast majority of homeowners holding mortgages with an interest rate well below this mark, are mortgage servicers ready to help the current borrower who faces default?
Notwithstanding, there is a more complex concern for homeowners facing default. Many borrowers who bought homes back when interest rates were hovering around three and four percent have chosen to stay in those homes. Subsequently, as we grapple with an unstable economy and interest rates that have doubled, we now face a rising increase in the mortgage delinquency rate. The Mortgage Bankers Association’s National Delinquency Survey reported a 38 basis point increase in first-quarter delinquencies compared to last year. The climb in delinquencies, bankruptcies, and foreclosures, albeit currently moderate, warrants close attention as existing loss mitigation options may not be relevant and are ripe for change. Are you ready?
If you’ve been waiting for the next servicing obstacle to drive change in your servicing operation, this may be it. The question is, do you have the right technological solutions for the current growing population of delinquent borrowers? Today’s delinquent homeowner more than likely has an existing mortgage interest rate that is significantly less than the current market rate. This eliminates existing benefits and qualification for modification options that rely on interest rate payment reduction to achieve a lower affordable payment and/or roll in arrearages. Although many homeowners have seen an increase in equity, once they become delinquent, today’s higher interest rates preclude them from qualifying for home equity lines of credit, second mortgages, and even many loss mitigation programs. Is the industry ready to support this new picture of default, and more importantly, do mortgage servicing systems have the flexibility needed to facilitate additional loss mitigation waterfall requirements, derive increasingly complex data aggregation and dissemination, perform more comprehensive eligibility calculations, and expand on the already extensive loss mitigation documentation set?
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The U.S. Department of Housing and Urban Development (HUD) recently introduced its Payment Supplement program to assist Federal Housing Administration (FHA) borrowers in default without consideration of interest rates. Different from options that modify the homeowner’s existing mortgage by leveraging interest rate spreads, the FHA Payment Supplement program does not alter first mortgage terms. Instead, the qualifying borrower is able to access Partial Claim monies to temporarily cover part of their mortgage payment, thus providing relief. As with any new program, rapid implementation can inadvertently create greater harm than benefit. Here are the implementation and impact highlights of Mortgagee Letter 2024-02 for consideration as you explore this offering:
If not, then it’s past time to innovate your approach to servicing operations and ready your organization for a successful implementation. This is where process automation with CLARIFIRE® makes a real difference in how you do business. Powering servicing necessitates using smart, flexible automation that is inherently proficient in assimilating data from multiple sources, completing complex logical calculations, determining optimized eligibility, and intelligent document processing. With these capabilities and more, we will make your implementation of FHA’s new Payment Supplement program a rapid success. Whether you’re a large, mid-sized, or small servicer, CLARIFIRE® is the modern process automation solution. Offering proven technology that positions your organization to provide continued and enhanced relief to distressed borrowers, we work with you collaboratively to tackle yet another phase of industry perseverance. Experience the power of real-time seamless servicing automation and intelligence with CLARIFIRE®. Visit us at eClarifire.com, and we will show you how CLARIFIRE® is truly BRIGHTER AUTOMATION®.
Jane has applied her vast experience (over 25 years) operating process-driven businesses to successfully redefine client-focused service. Jane has worked with expert programmers to apply cutting-edge web-based technology to automate complex processes in industries such as Financial Services, Healthcare and enterprise workflow. Her vision confirms Clarifire's trajectory as a successful, scaling, Software-as-a-Service (SaaS) provider. A University of South Florida graduate, Jane has received many awards related to her entrepreneurial skills.
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