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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.

2018 was a busy year for loan servicers and Clarifire was there to cover all the hot topics and emerging issues. Fluctuating market conditions, regulatory oversight and policy changes were all on the radar. Clarifire will continue to cover the challenges of 2019, sharing insights and guidance on circumventing issues as they arise.  After over a decade of collaborating with servicers to identify and solve problematic scenarios, we continue to work towards ensuring servicer readiness and responsiveness in today’s evolving financial landscape.

Earlier this year, the mortgage industry anxiously awaited the final confirmation of industry veteran and former Federal Housing Administration (FHA) Commissioner Brian Montgomery. Montgomery is well versed in FHA issues and brings deep industry expertise to a role held vacant for too long. At a time when servicers have a real opportunity to effectuate organizational change through innovation, Montgomery may be just the ally needed in 2019.

Industry experts say mortgage servicing is a “bright spot” for mortgage revenues. While slowing home price growth and compounding interest rate hikes may be challenging origination profits, mortgage servicing appears to be benefiting from the current landscape. This environment offers an incredible opportunity for mortgage servicers to invest in retooling and retrofitting their solutions, compliance and rules systems. Putting revenue to work in technical infrastructure also adds scalability and efficiency that can be leveraged when the market changes for the worse.  With many predicting a possible recession at the end of 2019 these benefits may be realized sooner than we think, and will help avoid having to staff up or add manual processes if the landscape changes faster than servicers can effectively respond.

Mortgage servicers, who continue to face scrutiny from oversight agencies, may have even more on their plate in the new year.  The Bureau of Consumer Financial Protection (BCFP) examiners continue to identify errors in servicer handling of trial modification conversions. The issue was significant enough to gain mention in the BCFP’s most recent Supervisory Highlights report and will almost certainly remain an area of focus during future supervisory examinations. Being subjected to penalties, fines, or even enforcement action can be extremely costly for servicers.  Conversely, errors in loss mitigation workflow can be easily avoided with the right workout rules management and automated workflow approach.

The Federal Deposit Insurance Corporation (FDIC) is the latest regulator to express concern over the rise of nonbank servicing. For nonbank mortgage servicers, the growing attention from regulators and other industry stakeholders, that  include Ginnie Mae, whose concerns we spotlighted recently, could mean policy changes are on the horizon, as well as heightened scrutiny of rules and operational processes that align  with mandated metrics.

Servicers should expect to face tougher scrutiny from Ginnie Mae in the coming months and year ahead. As the interest rate and lending environment has evolved, the government-backed mortgage-backed security (MBS) guarantor has expressed increasing concern with liquidity management. Agency representatives have hinted at new standards, tougher evaluations, policy changes, and credit ratings in the works. With enhanced oversight seemingly imminent, servicers should ensure they have existing requirements under control and be prepared for a ramp up in associated agency rules, operational disruption, and the need for workflow automation.

The Federal Reserve has given mortgage servicers a long and gradual runway to adapt to the realities of a higher interest rate environment. As consumers experience an increasing cost to carry debt, are faced with the inability to refinance into a lower interest rate mortgage, or find themselves faced with an increasing adjustable rate mortgage payment, we can expect to see a rise in delinquency, default and loss mitigation activity. 

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.

Two years ago, the Bureau of Consumer Financial Protection (BCFP) finalized an expansion of successors in interest (SII) protections as part of a larger package of new mortgage servicing rules. While the majority of the final rule required implementation last year, the successors in interest provisions only took effect a few months ago. The BCFP completely re-envisioned the coverage of SII and it is imperative mortgage servicers understand their extended compliance responsibilities in order to avoid having costly errors uncovered in regulatory supervision.