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How Smart Servicers Add Certainty in Uncertain Times

Editor's note: This story originally appeared in the December edition of DSNews, out now.

Who would’ve thought 2020 would turn out like this? We started the year with historically low delinquency rates, and February went on record as a “generational low” for delinquencies and foreclosuresUntil March, default servicing had been moving along at a dull hum. The next thing you know, a global pandemic and another wave of natural disasters delivered a one-two punch for the ages 

COVID-19 hit and hit hard, with unemployment reaching a 50-year high in April while the number of borrowers in forbearance soared to nearly 5 million. Scaling to address millions of borrowers in need of relief while transitioning employees to work remotely from home has continued to keep servicers scrambling to answer calls, place borrowers in loss mitigation alternatives, and incorporate temporary accommodations issued by investors. Just as mortgage servicers were able to draw a breath, the 2020 hurricane season opened at a fast and furious ratebreaking records at the onsetfollowed by another surge in wildfires.  

As one of the most tumultuous and unpredictable years in the mortgage industry’s history draws to a close, mortgage servicers can only wonder what comes next. However, if we’ve learned anything over the past eight months, it is that mortgage servicers need just as much relief as their borrowers do. With the right utilization of technology—and the right partner—they can get it.  

Deferrals, Defaults, Disasters  

As was rest of the country, most servicers were caught entirely off guard by the severity and speed of the pandemic’s impact. Even the best of default servicing operations and systems struggled to scale at the velocity needed, provide real payment determinations in response to borrower needs, and handle distressed borrowers in as timely and thorough manner as required. 

Many servicers may have kept their heads above water while rising to the onslaught of forbearance relief requests under the Coronavirus Aid, Relief, and Economic Security (CARES) Act. To say servicers have stabilized would be a fallacy, however, as another historic storm year and the largest wildfire season on record pushed demands for borrower relief to unfathomable levels.   

The annual hurricane season runs from June 1 to November 30. As the current season has progressed, the U.S is on track to surpass the previous 2005 storm record of 28 named storms. Not to be overlooked, this year’s wildfire season has reached unprecedented levels as well. Wildfires typically hit from August to November. By the end of October, the U.S. reported over 47,000 wildfires that had burned more than 8.5 million acres this year, destroying more than 13,000 structures in California, Colorado, New Mexico, Idaho, Oregon, and Washington. Although mortgage servicers have contended with record-high natural disaster levels for the past five years, addressing borrowers in need of disaster relief is difficult to manage even outside of the pandemic—but the pandemic certainly made things worse.   this year, destroying more than 13,000 structures in California, Colorado, New Mexico, Idaho, Oregon, and Washington. Although mortgage servicers have contended with record-high natural disaster levels for the past five years, addressing borrowers in need of disaster relief is difficult to manage even outside of the pandemic—but the pandemic certainly made things worse.   

Despite unemployment, delinquency, and forbearance rates, many borrowers have received temporary relief through CARES Act options. This has been especially true for those borrowers with Fannie Mae and Freddie Mac loans. Many of them have already moved out of forbearance into a normal payment mode, having deferred forborne payments to loan payoff, or having migrated into other relief alternatives. However, current delinquency trends remain dangerously high.   

Even as 90-day-plus delinquencies ebb, well more than 2 million homeowners remain seriously delinquent. Additionally, the number of loans that are not eligible for relief under the CARES Act, which only extends to federally backed mortgage loans, remains excessive. This poses further obstacles to recovery for those borrowers that may have received early relief from their servicer but have no guaranty of future access to these options simply because their loans do not fall into the government-owned category that includes Fannie Mae, Freddie Mac, the Federal Housing Administration (FHA), the Veterans Administration (VA), the U.S. Department of Agriculture (USDA), or the Federal Home Loan Bank (FHLB) mortgage partnership finance (MPF) mortgages.  

The question becomes, what does drinking from the delinquency fire hose look like once the remaining borrowers in forbearance roll off? With so much uncertainty continuing to surround the pandemic impact, including ongoing unemployment, the sunset of foreclosure moratoriums, and the end of CARES Act forbearance, mortgage servicers need efficiency, accuracy, and radically smart automation in their default servicing solutions. It is crucial to prepare for loss mitigation activity that far surpasses the means used to move through the Great Recession. While working amidst ongoing financial burdens resulting from investor advances and the high cost of servicing delinquent loans, servicers desperately need innovative technology that is affordable and easy to deploy consistently and rapidly.  

Innovating for Speed and Scale ...

Read the full article in the December issue of DS News, available here

About Author: Jane Mason

Jane Mason is the Founder and CEO of Clarifire and the creator of the CLARIFIRE, a sophisticated, automated workflow engine that streamlines and integrates all of an organization's business operations. Under Mason's leadership, CLARIFIRE has won numerous awards over the years including one of Cloud's Top 500 Applications Vendors for the past two consecutive years. She can be reached at JMason@eClarifire.com or on LinkedIn at LinkedIn.com/in/clarifire.
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