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.
Whether it’s the prospect of a recession as inflation persists, a rise in delinquency as borrower take-home pay shrinks, a shifting appetite for MSRs as servicing cash flows are impacted by a weakening economy, or modification impairment as interest rates rise, servicers are headed for yet another season of unpredictability. The big difference may be that servicing margins could be hit harder without the offset of healthy origination volume or lucrative MSRs, making this call to action even more relevant. Make certain you’re prepared for whatever may be next on the horizon so that you can assist your borrowers through proactive foreclosure prevention.
The Uphill Climb of Foreclosure Activity
The third quarter Foreclosure Market Report was just released by ATTOM, reflecting a three percent quarterly increase in foreclosure filings, which includes default notices, foreclosure auctions, and property repossessions. There was a 104 percent increase in filings as compared to Q3 of 2021. Although double and triple-digit increases in year-over-year foreclosure activity are partially attributable to the transition out of pandemic moratoriums, this is hardly an indication of stability. The 2022 Q3 report stated that foreclosure filings were up 62 percent over September of 2021, foreclosure starts increased 167 percent over Q3 of last year, and lender/bank repossessions rose by 39 percent as compared to Q3 2021. Notably, the number of repossessions may be understated as borrowers were able to take advantage of high home value appreciation and robust housing sales in lieu of facing foreclosure auctions.
Getting a Jump Start on Real-time Issues
Preventing foreclosure or imminent default is a reality with automated early identification and relief options that are accessible from any device, 24/7. This strategy is imperative as borrowers' digital demands continue to drive servicing. Here’s how proven technology can make a difference now.
Target increased delinquency
Already a very real risk to Ginnie Mae issuers and MSR holders, nonbanks in particular, may soon be faced with advance payments as the FHA early-stage delinquency rate hit 8.85% in Q2 of this year, compared to 2.64 percent for conventional mortgages.
Use proven technology to target early identification of borrowers experiencing payment difficulty. By focusing on these metrics for found hotspots, servicers can process this data in bulk outputs. The results allow you to allocate resources where they can make a difference through multi-layer communication modalities, personalized plans, and ease of access.
Prep for the return of REO
Although improved equity helps to soften some of the default equation over time, housing appreciation and sales have, at a minimum, plateaued. A clear sign of declining housing appreciation can be seen as less than half of tracked metropolitan areas saw double-digit appreciation in Q3 of this year. Although still significant, this segment has tumbled from 80 percent of the reported areas in Q2 to 46 percent.
Use proven technology to target metropolitan areas experiencing the most significant drops in overall appreciation and/or stagnation. Monitoring payment activity in these areas, in conjunction with automated workout underwriting technology, will assist servicers in ensuring relief measures are available when and how your borrowers need them.
Manage modifications as interest rates rise
Spiking interest rates are a key factor in determining available default relief through modification, a data point that has held at six percent or below since the Great Recession. This volatility in current interest rates not only impairs modification approvals but adds duress for a generation of homeowners that have little to no experience with interest rates at higher thresholds or real exposure to inflation.
Use proven technology and automation to identify default options and modification scenarios specific to your borrower’s needs. This reduces friction while accelerating workout timeframes and access to relief, as automated workout underwriting simultaneously removes many of your borrowers from the path to eminent default.
Improve your cash flows!
Are you still avoiding end-to-end automation in a single application? Creating seamless servicing through intelligent workflow automation is extremely attainable and is the only real answer to managing cash flows in this season of unpredictable economic pressure. As you plan out foreclosure prevention to stave off obstacles on the horizon, take this opportunity to modernize your operations. Streamline your relief capabilities with sophisticated workflow that drives automation through analytics and decisioning, putting your resources to work where they’re most needed to preserve cash flow. Let the proven technology do the heavy lifting. Whether improving MSR value, helping ensure 24/7 access to default relief, facilitating complex modification alternatives, or identifying trends that can lead to increased delinquency, CLARIFIRE® is your answer.
Make CLARIFIRE Part of Your Plan
CLARIFIRE has delivered proven workflow, foreclosure prevention, and loss mitigation innovation since the Great Recession. Don’t wait for your team to hit the landmines of inflation stress – take action now by implementing a sophisticated workflow application that provides a truly iterative process while creating transparency, compliance, and scalability. CLARIFIRE can easily transform your approach to foreclosure prevention with real-time, no-touch, seamless servicing. Let CLARIFIRE help you eliminate your outdated systems and processes. Replace them with cutting-edge, cost-effective, and modern workflow that delivers intelligent decisioning and proven automation. Learn how you can prevent foreclosure and future-proof your organization by visiting us at eClarifire.com or contacting us directly at 866.222.3370. CLARIFIRE, 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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