The Right Tools for the Right Time

Editor's note: This feature appears in the July 2021 edition of DS News Magazine, available here. 

A change is coming, and mortgage servicers need to be ready for it. COVID-19-related forbearance will soon end for millions of homeowners. As it does, many borrowers will have questions about their repayment obligations. Borrowers who fail to meet these obligations may face a higher risk of foreclosure, something the Consumer Financial Protection Bureau doesn’t want to see. 

Servicers need to communicate effectively to guide borrowers out of forbearance and back on track with their mortgage payments. Servicers must, for instance, contact borrowers 30 days before their forbearance period ends to discuss their repayment options. Missing this deadline is not an option. 

Federal regulators have made it abundantly clear that servicers are likely to be judged based on the outcomes their borrowers experience after forbearance. Helping borrowers understand their options is one key to preventing foreclosure and avoiding unnecessary scrutiny from federal regulators. 

Servicers can take several steps to improve communication and assist borrowers as forbearance ends.  

Communicate via Multiple Channels  

Given its mission to protect consumers, the CFPB has offered mortgage servicers resources and guidance on how it expects them to respond to consumers and their requests for information. 

CFPB has specifically emphasized the importance of communication and recommends that servicers use multiple methods to communicate with borrowers. The Bureau mentioned several techniques that servicers have used to reach homeowners, help them understand their options, and take appropriate action for their situation. These techniques include: 

• Using self-service web-based tools and customer portals to assist homeowners in identifying available loan assistance options for their circumstances. Mortgage borrowers are not always eager to call their servicer, so using technology to make it easy for them to find the information they need on their own makes perfect sense.  

• Providing tailored communication to their mortgage borrowers that includes videos and emails explaining their options based on their loan type (e.g., FHA, VA, USDA, Fannie Mae, or Freddie Mac). 
• Providing information and educational resources in multiple languages to better assist consumers with Limited English Proficiency (LEP), thereby serving a broader range of homeowners. Even the best educational information will not help borrowers if it’s written in a language they cannot understand. 
• Identifying borrowers’ contact preferences in advance, allowing servicers to deliver information in a convenient, timely manner.  

Provide Educational Resources  

Helping borrowers get back on track post-forbearance and avoiding another foreclosure crisis are priorities for the federal government. CFPB, for its part, is willing to help by providing educational resources. Other agencies and the nation’s largest investors are following suit. The Bureau has suggested that servicers refer consumers to the interagency housing portal, which explains how forbearance programs work and provides an overview of many of the options available. The site offers a number of helpful resources for  borrowers and servicers, including information for consumers about forbearance repayment obligations, available in multiple languages. 

The complicated mortgage servicing process is difficult for many borrowers to fully understand—particularly when they have limited English proficiency. To address the language barrier, the Federal Housing Finance Agency, Fannie Mae and Freddie Mac launched the Language Access Multi-Year Plan to help limited English-speaking borrowers understand and participate in obtaining a mortgage. The Mortgage Translations clearinghouse, CFPB, Fannie Mae, and Freddie Mac provide resources related to forbearance and avoiding foreclosure in several languages. These language resources benefit consumers and the mortgage industry, especially since 70% of new U.S. homeowners in the next two decades will be Hispanic.  

Communicate Proactively   

The CFPB has made it quite clear that the government is not taking responsibility for helping consumers navigate the post-forbearance process. Mortgage servicers are responsible for helping borrowers who have questions about their loan and/or post-forbearance repayment options. The CFPB does not expect to see borrowers coming to them for information that they should be receiving from their servicers. Many servicers, however, fall short when it comes to communicating effectively with borrowers.   

Key findings from the 2020 JD Power US. Primary Mortgage Servicer Satisfaction Survey put this into perspective. 

• More than three-fifths (62%) of customers visit their lender’s website as a first line of information, but only 28% say online is the most effective channel by which to resolve an issue.  
• Nearly one-fifth (19%) of customers say it is not easy to contact a live agent via the telephone. 
• Nearly half (44%) of at-risk customers called their servicer in the last 12 months vs. 25% for low-risk customers. [That’s nearly twice the load for servicing personnel, and it will get worse when forbearance ends.] 
• Customers who receive three or four proactive communications per year from their mortgage lender have the highest levels of overall satisfaction. Yet only 8% of customers indicate receiving this level of communication. 

The CFPB expects servicers to communicate more effectively and proactively in 2021 as forbearance ends. Fortunately, leading-edge mortgage servicing software can help servicers meet this expectation. 

Take Advantage of Mortgage Servicing Software and Web Applications  

Servicers need the right mortgage servicing software and effective self-service web applications to quickly deliver information to borrowers. Servicers must have the ability to push out messages to borrowers through multiple media and then track the results. This will be critically important, both for helping borrowers achieve the best possible outcomes and for satisfying federal regulators. But that’s just table stakes. 

Servicers need mortgage servicing software that also allows them to:  

• Easily and automatically generate emails to specific borrowers, notifying them that a statement/notice is waiting for their review via a web application. Sharing information via web application allows servicers to track and confirm that borrowers received the information. 

• Generate and push out personalized messages to specific borrowers that they can view through the web application portal. These personalized messages should appear in a pop-up window whenever the borrower logs into the web application. For example: “Your forbearance period will end on September 30, 2021. Please contact us to discuss your repayment options.” 
• Reach out to borrowers electronically for rapid communication, in addition to contacting them by mail. Servicers must follow the specific borrower contact requirements of the various regulatory agencies regarding notification of borrowers whose loans are entering foreclosure, of course. Servicing software should make this easy. 
• Deliver real-time mortgage statements and other information to borrowers easily and automatically via web apps. By reducing routine phone calls from borrowers, servicers have more time to reach out to borrowers who are getting ready to exit forbearance and/or at risk for defaulting on their loan. 

The right mortgage servicing software provides this functionality. Servicers should examine their software to be sure it has these essential communication-enhancing capabilities. By improving communication with borrowers, servicers can help them avoid foreclosure as forbearance ends.