It is hard to imagine that we are approaching the three-month mark for working under COVID-19. Keeping up with industry change as we continue to grapple with pandemic disaster has kept us all on our toes, from the Coronavirus Aid, Relief, and Economic Security (CARES) Act to CFPB guidance to regular investor updates. Now more than ever, vendor partnership is an essential component to success. It's important to partner with an experienced, nimble innovator that can understand your unique needs, in addition to managing the ongoing maze of regulatory guidance.
Self-quarantine resulting from the Coronavirus (COVID-19) pandemic has propelled the industry into an entirely different mode of doing business. With barely two months passed since the Coronavirus Aid, Relief, and Economic Security (CARES) Act was enacted, mortgage servicers have been thrown into a tailspin. Experiencing what many businesses have in the face of COVID-19, mortgage servicers now have their entire staff (for the most part) working from home, and all customers sitting at home as well trying to make contact for relief services. The exception is that not all businesses have customers receiving a pass to not make payments, while also having to foot the bill for nonpayment. Plus, the regulatory bodies have each issued and continue to update “temporary flexibilities” that require understanding, implementation, and tracking. The cherry on top is that mortgage servicers are now expected to ensure their customers all transition to a secondary relief plan, either six months in or a full year later, that at this juncture, is loosely defined at best.
A record number of homeowners have taken advantage of COVID-19 related forbearance, pushing the percentage of mortgages in forbearance up to 7.54 as of April month-end. The real concern today is that the disposition of these loans at the end of forbearance is extremely unclear. Under the Coronavirus Aid, Relief, & Economic Security (CARES) Act, impacted homeowners who have federally backed mortgages can access up to 180 days of forbearance relief with the possibility to extend for an additional 180 days. The current industry concern is that details surrounding what happens when forbearance ends are extremely unclear, which may leave many financially stricken borrowers who took advantage of a COVID-19 forbearance in a precarious situation.
As servicers grapple with the numerous temporary “flexibilities” and “accommodations” that have been recently issued, accurately adhering to credit reporting requirements under COVID-19 may create long term issues for servicers, credit reporting agencies, and consumers. The credit protection offered under the Coronavirus Aid, Relief, and Economic Security Act (CARES) is fairly nuanced from an implementation perspective and will require significant attention to requirements, implementation, and reporting.
With skyrocketing unemployment, which will invariably lead to more delinquencies, consumers will have access to credit reporting relief under the Coronavirus Aid, Relief, and Economic Security Act (CARES) enacted on March 27, 2020. By modifying the Fair Credit Reporting Act (FCRA) and Regulation V, under Section 4021 of the CARES Act, protections have been put in place for consumers that need temporary “accommodations” due to the personal impact of COVID-19 on their livelihood.
As the world continues to struggle and change, the way we think of natural disasters evolves and changes along with it. When you hear the term natural disaster, images from the aftermath of hurricanes, tornadoes, floods, fires, and earthquakes come to mind. Over the last couple of months, we were introduced to a new kind of natural disaster, COVID-19.
Disaster risk exposure relative to homeowner’s insurance has become a mounting concern for mortgage servicers as the number of natural disaster events remains high. Servicers need workable strategies to protect mortgage collateral as they face an increasing number of disaster events toppling the $1 billion mark. In this escalating disaster environment, mortgage servicers find themselves chasing insurance coverage options to help minimize their risk exposure.
The 2019 hurricane season is already off to a troubling start with Hurricane Dorian having caused an estimated $1.5 billion to $3 billion in insurance losses across the Caribbean. Even tropical storm Barry is estimated to have caused as much as $600 million in damage in the Southeast, including Alabama, Florida, and Mississippi. Last month, the National Oceanic and Atmosphere Administration (NOAA) updated its predictions for the current hurricane season, increasing expectations for an “above-normal” season.
It has been a difficult year for many rural American families, particularly those that farm. From unprecedented flooding, tornadoes, and tariffs, the “perfect storm” of challenges could have a historical impact on areas of need. During this time, many farmers and homeowners are likely to turn to the United States Department of Agriculture (USDA) and its Rural Housing Service (RHS) for support. Mortgage servicers have a big part to play in preparing and managing an influx of homeowners seeking disaster relief and loss mitigation options.
With nearly a dozen different disaster relief specific programs and constantly changing foreclosure moratoriums, mortgage servicers shouldn’t need another reason to take disaster preparedness seriously. If you’re still trying to catch up to the pack in deploying technology-enabled workflow and workout solutions to manage the varied rules and requirements tied to disaster relief, Ginnie Mae is making a case for proactively tackling the effects of natural disasters that you can leverage.
Most servicers’ portfolios include a mix of mortgage programs, reflecting a diverse origination market. Last year, the government-sponsored enterprises, Fannie Mae and Freddie Mac, represented the largest sector having purchased roughly 40 to 50 percent of new originations. The Federal Housing Administration (FHA) and Department of Veterans Affairs (VA) are responsible for a little less than a quarter of the market, with private securitizations accounting for a small 2 percent of new originations, Small Business Administration (SBA), U.S. Department of Agriculture (USDA) and portfolio loans withstanding.
Over the past few months, Clarifire has published meaningful discussions on the numerous requirements mortgage servicers have taken on to manage disaster relief programs and support homeowners experiencing related financial hardship. Amidst financial remedies, such as forbearance and disaster relief modifications, there is another critical area that servicers look out for in times of disaster…. ensuring property repair doesn’t financially burden borrowers or impair collateral.
The extent to which natural disasters are hitting the United States is beyond historical servicer casualty planning. The three costliest natural catastrophes in the world occurred here in 2018. As all servicers can attest, navigating record-breaking natural disaster has epitomized operational disruption. This year is likely to produce a whole new set of homeowners in need of disaster relief, continuing to put the onus on servicers to triage these issues in real time. As this trend continues, servicers should take the lessons learned from 2018 to rethink and strategize how to more effectively manage the effects of future occurrences.
Over the past decade, mortgage servicers have had a front row seat to a dramatic transformation of the regulatory and investor landscape. Just about the only thing that has been consistent since the financial crisis is change. Simply identifying and staying abreast of ongoing updates has been an enduring challenge for servicers, who are trying to make the most of available resources.
With an unprecedented number of US natural disasters in 2018, servicers remain in the mode of assisting borrowers that have been impacted. In addition to handling ongoing cases, every new contact necessitates that servicers immediately begin to triage borrower circumstances. With each government entity stipulating their own unique requirements, servicers face a conundrum as they endeavor to analyze and execute on different modification options across disparate timelines and qualifying criteria.
Interest rate increases, natural disasters, and seasonal changes can cause dramatic swings in delinquencies, oftentimes making it difficult for servicers to accurately forecast an uptick in foreclosure volume ahead of time. An annual September spike in mortgage delinquencies is one of the more predictable industry trends; however, this September’s figures, which were published a few weeks ago, may have caught some servicers by surprise, and could indicate a hefty ramp up in loss mitigation efforts is on the horizon.
Is hurricane season over? Not if you’re a loan servicer. Given the skyrocketing amount of devastation caused by hurricanes, wildfires, flooding and other natural disasters, loan servicers are faced with developing a complete process for relief that begins when disaster strikes. Historically, disaster relief was an infrequent and isolated issue, allowing servicers to manage assistance on a manual, ad hoc or one-off basis. In today’s environment, the volume of natural disasters, the geographic breadth, and extent of recent changes to investor requirements, make this approach a risky venture.
What does it mean to be disaster ready? As a servicer you’re already juggling a variety of change initiatives at any given time, with unreasonably thin margins and minimal resources. Beyond basic system enhancements to your loan servicing system…
The end of this year’s hurricane season is less than two months away; however, with hurricane Florence barely in our rearview, are your operational processes in check to meet disaster relief requirements? If not, they should be.
Last year’s federal aid for natural disasters was nearly tenfold that of the previous year. Hurricanes Harvey, Irma and Maria alone are said to have affected approximately eight percent of the population in the U.S. The Federal Emergency Management Agency (FEMA), who provides assistance in the event of all natural disasters, reported that more than 25 million people were impacted by hurricanes, flooding, or wildfire in 2017, and close to five million households applied for FEMA’s Individual Assistance program requesting direct support.
One can only begin to imagine how many homeowners have contacted their mortgage servicer for information and participation in relief programs. Although the servicers' phones start to ring as soon as there’s a Presidential Disaster Declaration, the real test of readiness occurs when borrowers are unable to make payments and need to understand their options for financial assistance.
While nearly all government-backed mortgage guarantors provide a wide range of disaster relief programs, perhaps none are quite as unique and diverse in their offering as the Small Business Administration (SBA). Most mortgage lenders and servicers have been working hard to stay abreast of updated disaster relief requirements for Fannie Mae, Freddie Mac, the Federal Housing Administration (FHA), the Department of Veterans Affairs (VA) and the US Department of Agriculture (USDA), but not as many are aware of the extensive options available to SBA customers, not to mention that the SBA administers their programs directly.
Just last week, Freddie Mac issued a press release advising mortgage servicers to prepare to assist borrowers whose homes or places of employment were impacted by Hurricane Florence. Likewise, they directed homeowners to pursue disaster relief once out of harm’s way. Freddie Mac said, “We strongly encourage homeowners … to call their mortgage servicer … to learn about available relief options,” adding, “we stand ready to ensure that mortgage relief is made available.”
As Hurricane Florence tests the preparedness of state and local governments up and down the East Coast, Fannie Mae servicers must similarly ask themselves if they are prepared for revamped disaster relief requirements this hurricane season and beyond. Fannie Mae’s disaster assistance requirements span more than a dozen chapters of the Seller/Servicer Guide.
When a disaster strikes, the United States Department of Agriculture (USDA) is ready to respond to the needs of American farmers with a vast toolbox of disaster assistance programs, from emergency loans to crop insurance. In the mix of a wide range of programs, it can be difficult for servicers of Rural Development (RD) mortgages to see where they fit into the ‘farm safety net.’
When it comes to disaster response, the Departments of Veterans Affairs (VA) is one of the more responsive federal agencies. Servicers of VA loans should be prepared to closely monitor the needs of distressed homeowners in disaster-stricken areas and provide timely and flexible relief.
Three of the top five costliest hurricanes on record occurred last year, according to the National Oceanic and Atmospheric Administration (NOAA), resulting in an estimated $306.2 billion worth of property damage. That shatters the previous record of $214.8 billion worth of damages in 20051. In a world of billion-dollar weather events, mortgage servicers face the challenge of managing hundreds of thousands of hazard insurance claims, repairs, foreclosure moratoriums and relief programs. The Federal Housing Administration (FHA) is particularly vigilant in managing its portfolio and exposure to loss, and expects servicers to stay on top of fluctuating timelines, priorities and policies that apply to recovery areas.
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