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The Right Tools for the Right Time

Editor's note: This feature appears in the July 2021 edition of DS News Magazine, available here. [1] 

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: 

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. 

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:  

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.