Clarifire Conversations

Following up on our last blog, ‘Servicing Answers to High Interest Rate Pressures,’ it is crucial that mortgage servicers do not succumb to the ongoing news of tumbling interest rates and the possibility of multiple Federal Reserve rate cuts on the horizon. With inflation reports calming, the average 30-year mortgage rate dropped under 6.50 percent; however, this does not change the extensive gap between today’s rate and the historically low interest rates that are tied to the majority of mortgage loans currently being serviced. As mortgage delinquency rates appear to be teetering on a precipice, industry agencies are gearing up for a change in loss mitigation strategy. Last month, Clarifire delved into the new FHA Payment Supplement Program. This month, we’re taking a look at the Department of Veterans Affairs (VA) recently announced changes designed to assist veterans at risk of foreclosure.

The Q3 2023 U.S. Foreclosure Market Report recently published by ATTOM Data Solutions reveals what lies ahead for mortgage servicers. Illustrating an increase in foreclosure activity that has continued to escalate since the lapse of the government’s foreclosure moratorium, we are quickly finding ourselves back where we started prior to the pandemic.  Before you think this is no big deal… let’s look at what’s happening, why this surge in activity is different, and what you should be doing to stave off disruption.

Don’t be deluded by ongoing reports of decreasing delinquency and foreclosure. As is often the case, it depends on which numbers you’re watching. Foreclosure starts continue to increase, along with early-stage delinquencies. You can make a direct impact on foreclosure avoidance with modern self-serve capabilities that assist your borrowers in understanding their options before they become seriously delinquent. Servicers need a preventative plan now – not later – to manage a servicing landscape that is filled with potential landmines.

We’ve just passed the two-year anniversary of COVID-19 foreclosure moratoria and are quickly rounding the corner on the first quarter of 2022. Where does this leave mortgage servicers as the industry wrestles with rising foreclosure filings amidst ongoing volatility in regulation, the economy, and technology? Above all, mortgage servicers should not be taking a pause. Despite receding delinquency and forbearance percentages, foreclosure activities are on the rise, which will more than likely precipitate more regulatory change, and may easily worsen under current economic factors. Given the circumstances, the most important tactic this year may be staving off uncertainty.

The key to a successful transfer of mortgage servicing rights (MSR) is a smooth transition of the portfolio from one servicer to another. It’s a big feat, but not an impossible task. Automated workflow is an important tool to help decrease the risk, for both the customer and the servicer, of costly missed steps in the transfer process.