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Making Forbearance More Effective

Editor's note: This story originally appeared in the November edition of DS News. 

Mortgage forbearance is still a reality for many borrowers and servicers, more than six months after the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) took effect on March 27Under the CARES Act, mortgage servicers must offer up to 12 months of forbearance, in up to 180-day increments, to COVID-19-affected homeowners who have federally backed mortgage loans for one to four-unit family properties.  

Although the number of loans in forbearance has declined from the peak of 8.55% in early Juneaccording to the Mortgage Bankers Association (MBA), 6.81% of loans (approximately 3.4 million homeowners) remain in forbearance as of September 27. New requests for forbearance have declined significantly but are still coming in—particularly from borrowers with FHA or VA loans.  

To accommodate the large volume of loans in forbearance, mortgage servicers must have functional, flexible, and effective forbearance processes in place. Creating clear forbearance and post-forbearance plans should improve borrowers’ understanding of forbearance, speed up the overall process, and preserve revenue while avoiding costly foreclosures. Servicers can ease the process for borrowers by following these steps. 
 

  • Communicate with borrowers.  
  • Educate borrowers about the forbearance process. When implementing a forbearance plan, mortgage servicers must clearly explain to borrowers what forbearance means, what repayment options they have, and the implications (for example, a potential delay in their ability to refinance their loan). Servicers can refer to Fannie Mae’s and Freddie Mac’s “COVID-19 Forbearance Script for Servicer Use with Homeowners” for guidance on how to discuss what forbearance means, how it works, and repayment options.  
  • Respond promptly. In a letter sent to 11 large servicers, requesting information about their forbearance program, the U.S. House Committee on Financial Services stated that “borrowers seeking assistance must be able to contact a customer service representative without excessive wait times or other delays.” According to the MBA’s Forbearance and Call Volume Survey, call center volume was almost as high in mid-September (8.3% of servicer volume) as it was in May (8.6%), with September call wait times (three minutes) slightly longer than they were in May (2.6 minutes). Servicers should work diligently to answer borrowers’ questions and meet their needs promptly during this stressful time. Servicers should take advantage of borrower-facing web applications to provide mortgage statements and information to borrowers who aren’t in forbearance, to reduce routine phone calls and give servicers more time to talk with the forbearance borrowers.  
  • Help borrowers create a post-forbearance roadmap. ...

Read the full story on p. 70 of November's DS News, available here

About Author: Anita Bush

Anita is VP of Mortgage Servicer Product Development for Financial Industry Computer Systems, Inc. (FICS), a leading mortgage software company specializing in flexible, cost-effective, in-house mortgage loan origination, residential mortgage servicing, and commercial mortgage servicing software for mortgage lenders, housing agencies, banks, and credit unions. FICS’ software solutions provide customers the flexibility to choose an in-house or cloud hosting solution. The company also provides innovative document management, API, and web-based capabilities in its full suite of products. Visit FICS.com for more information about our exceptional mortgage software solutions.
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