Clarifire Conversations

Although foreclosure rates are frequently touted to be at historic lows, servicers must still prepare for quarterly upticks and unexpected market changes that can quickly drive up foreclosures episodically. Increases in delinquency and foreclosure rates are in various quarterly reports, in numerous geographic pockets, and more frequently in areas where natural disasters occur.  Despite improved economic factors, the industry still needs to consider interest rate volatility, stagnating housing starts, latent home appreciation, and rising consumer debt.  Let’s not leave out talk of a forthcoming recession.  Last but not least, our industry has changed since we last saw serious delinquency risk, making awareness and readiness more important than ever.

The past decade has been a challenging one for mortgage servicers, with countless time and resources spent on high volumes of delinquencies, rigorous loss mitigation standards, and growing investor requirements. Looking ahead to the next ten years, stakeholders are asking if the old servicing model still makes sense for a transformed industry.

In May, we shared with you a sneak peek of what to expect at this year’s Ginnie Mae Summit.  With promises of an “in-depth, top-to-bottom perspective on Ginnie Mae’s business,” it certainly did not disappoint.  If you missed this exciting industry event, we’ve got you covered.  From government lending policy changes to Ginnie 2020, here’s what you need to know.

It appears that the Federal Housing Administration (FHA) will finally get the technology modernization it deserves.  This year Congress approved $20 million in funding for FHA’s technology infrastructure, coinciding with several initiatives to retool systems that are decades old. This funding acknowledgment will support significantly enhanced technological capabilities that will benefit the industry as a whole, as well as individual lenders and servicers.

The Consumer Financial Protection Bureau recently published its 18^th Edition of Supervisory Highlights, reviewing supervisory actions taken in the latter half of 2018.  The Supervisory Highlights outline four sectors that received significant supervisory attention.  Mortgage servicing once again made the list, alongside automobile loan servicing, deposits, and remittances. The findings related to mortgage servicing violations reiterate the need for up-to-date policies and procedures, as well as mechanisms to ensure adherence.

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.

New research suggests a growing number of service members are opting for Department of Veterans Affairs (VA) mortgage programs over other alternatives. The Consumer Financial Protection Bureau’s (CFPB) Quarterly Consumer Credit Trends report for the first quarter of 2019 dug into first-time service member home buying trends.  The results should remind mortgage servicers of the need to stay on top of VA-specific policy requirements, especially the VA’s expanding disaster relief loss mitigation requirements.

The Consumer Financial Protection Bureau (CFPB) recently published an assessment of the significant mortgage servicing regulatory overhaul that went into effect in January 2014. To assist borrowers in avoiding foreclosure, the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) required the consumer watchdog to expand the scope of regulatory and supervisory oversight of mortgage servicing under the Real Estate Settlement Procedures Act (RESPA). The legislation also required the CFPB to conduct an assessment of major rulemakings within five years of the effective date – bringing us to 2019. 

As part of its ongoing innovation initiative, the Office of the Comptroller of the Currency (OCC) has announced its own Innovation Pilot Program. The pilot will complement several ongoing programs and efforts, including the creation of the new Office of Innovation, “innovation hours” programs at various offices, and the availability of bank charters to fintech companies. Moving another step forward, the innovation pilot will establish a “sandbox” environment where financial institutions can test innovative products and services in a controlled environment.

A lot of industry attention is currently focused on the finish line for the digitizing of the mortgage business, with mortgage lenders, servicers, and vendors in countdown mode.  In this environment, it’s important not to lose sight of the risks that lay along the route. Additionally, digitizing the mortgage lifecycle only represents a portion of the evolving automated mortgage process, which encompasses expanding data and privacy requirements, the increase of mobile applications, and much more. 

Following this year’s MBA National Secondary Marketing Conference and Expo, the mortgage industry is looking forward to Ginnie Mae’s 2019 Summit. Subject to registration approval, lenders, servicers, investors, document custodians, policymakers, and members of Congress are already set to attend this annual event.  Taking place in Washington, DC from June 13 through June 14, 2019, this year’s summit promises an “in-depth, top-to-bottom perspective on Ginnie Mae’s business.” While there will certainly be a lot of developments to come out of the conference, we have a sneak peek of what to expect.

The mortgage industry’s latest buzz word is “digital mortgage”, a novel term for the ongoing pursuit to remove paper from the process.  However, this endeavor encompasses mobile apps, eClosings, data integration, blockchain, and other areas that are all aligned with mortgage origination.  Once a mortgage loan is closed, the data is passed onto the servicer, where it is far from digitized.   

In a few weeks, key housing finance and servicing stakeholders will gather in New York City to discuss what lies ahead for capital markets, government lending, and mortgage servicing. Clarifire will attend the Mortgage Bankers Association’s Secondary Marketing Conference and Expo on May 19 through May 22, 2019, to stay on top of industry hot topics, including mortgage servicing rights (MSR) liquidity, the future of the secondary market, government lending issues, and the digitization of mortgage lending.

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.

The industry continues to hunger for technology to improve workflow, as well as streamline and automate operational efficiencies. While these investments promise a competitive edge in a challenging environment with tight margins, other factors, outside of a servicer’s control could also have a big impact on business profitability.  

With record low profitability in the mortgage space, lenders, servicers, investors and government agencies alike need to aim for maximum resource efficiency. This approach extends to your technology and software strategy as well. When margins are stretched, and manual operations no longer cut it, industry participants must ask themselves whether it makes sense to build or buy their technology solutions.

Last week, Clarifire told you what to expect from the Mortgage Bankers Association’s (MBA) annual Technology Solutions Conference and Expo in Dallas, Texas. But if you didn’t have a chance to make it down there, we’ve got what you missed. In addition to a showcase of new advancements, the conference explored the tradeoff between upfront investment costs and long-term efficiencies, drags on innovation, and the trajectory of the Mortgage Industry Standards Organization (MISMO).

The Mortgage Bankers Association has promised “big solutions” and “big things” at this year’s Technology Solutions Conference and Expo in Dallas, Texas. As the mortgage industry continues to embrace technology solutions in every aspect of the business, the conference next week offers an opportunity to expand the dialogue between lenders, servicers, and vendors to uncover new areas in need of innovation and improve on existing services.

Mortgage servicing is at a point of inflection, as this segment of the industry becomes more innovative and customer centric. The focus at this year’s Mortgage Bankers Association National Mortgage Servicing Conference and Expo highlighted this element, hitting the present and ‘the now’. The industry event in Orlando, Florida, appropriately themed “Servicing NOW!” explored the lessons of the past and the promise of tomorrow. 

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.

In previous blogs, Clarifire has discussed how servicers can successfully manage natural disaster relief. This month, however, servicers are faced with responding to a different kind of disaster – the government shutdown. With roughly 800,000 impacted government employees, servicers play a key role in helping borrowers navigate the challenges resulting from temporary loss of income.