Legal issues, including compliance, defaults, and the government and service sector perspectives were the topics of discussion at the Five Star Legal League 100 Fall Summit, part of the Five Star Virtual Conference.
The Summit provided top industry insights on various legal issues, including the latest details on foreclosures and forbearances, how the government is handling moratoriums, and other issues and how servicers are managing their pipelines in this unprecedented economy.
The Summit kicked off with experts from the Legal League 100’s Advisory Council discussing how it represents the membership in its discussions, priorities and actions. Roy Diaz, Managing Shareholder, Diaz Anselmo Lindberg, P.A. & Chairperson, LL100; and Stephen Hladik, Partner, Hladik, Onorato & Federman, LLP discussed these items, as well as the impact foreclosure moratoriums have had on law firms. They also talked about fee parity within the industry.
Following the Advisory Council’s discussion, industry economic experts provided insights on how unemployment is expected to impact foreclosure levels and how forbearance rates is expected impact bankruptcy filings, as well as other factors affecting the default market.
“The economy is in a pretty bad place,” said Tendayi Kapfidze, Chief Economist, LendingTree. “During the financial crisis, the economy shrunk 4.8%. We had a decline in the second quarter [of 2020] of up to 30%. That’s not going to persist, but even if we get all but 9% of that back, that’s going to be an economy that’s about 10% smaller than it was at the beginning of the year. The question is how long will it last, and what changes are going to occur in the economy as a result of it.”
“We are in a once-in-a-lifetime event,” said Lawrence Yun, Chief Economist and SVP of Research, NAR. “We may actually be in a new economy, with a large percentage of people able to work from home in the future years. Without a doubt, we plunged into a recession, with more than 50 million people applying for unemployment insurance at some point. That’s more than one third of the labor force.”
But there is job creation occuring in some sectors, while there are job losses in others, Yun added. And the housing sector is actually enjoying a bounce, even as unemployment remains high.
“We expect very strong activity in autumn and winter of this year,” Yun said.
A session on compliance and government outlook examined how the government is handling moratoriums, timelines, and updates to compliance rules, as well as what the future will look like once moratoriums expire.
The government decisions on moratoriums, foreclosures and forbearances will sharply impact servicers’ businesses, as the last panel of the day discussed.
“We are seeing a lot of activity from our borrowers,” said Patrick Cox, SVP Operations, PHH Mortgage Corporation. “While we had a tremendous increase in the requests for forbearance in March and April, but we have since seen a decrease in activity in new borrowers reaching out to us. We do anticipate a lot of those borrowers who are currently on forbearance extending.
“One surprising thing we found is that a lot of the borrowers who asked for forbearance in the March/April time frame actually continued to pay. We expect that behavior to continue.”
Bankruptcies have fallen to half of what they were in March, Cox added.
With the changes in borrower’s finances, and the foreclosure/forbearance/moratorium rules, PennyMac Loan Services is re-evaluating its financial review methodology, said Jennifer Gordon, VP Vendor Management. “We’re also taking a look at our attorney network, which I think is a very solid network. We’re taking a look to make sure we have appropriate backups in place in every space.”
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