Prepare for regulatory climate change
Editor’s note: This article appears in the April 2021 issue of DS News, available here.
WithCFPB’s new leadership intensifies, a pretty much same Democrat / Republican Senate and COVID housing assistance policies expire in June (from now on), mortgage lenders and managers must be ready for anything.
They must also be able to act on regulatory changes in real time while now full comconsistent and flawless customer service for strong and distressed borrowers. Below, we cover topical political topics and how to navigate them all in real time.
Lan exam Biden Forbearance Politics VShangs
Inot end of February, the Biden administration announced several updates CARES Forbearance and Foreclosure Programs for Distressed Borrowers as the pandemic slows economic recovery, including:
- Six additional months of abstention now available in two three-month installments until June 30
- Foreclosure moratorium extended until June 30
- New abstention requests authorized until June 30
After extending the foreclosure ban for homeowners with federally funded mortgages to March 31, President Biden further extended the moratorium on foreclosures and expanded access to forbearance.. Eis gives owners more time to recover as vaccine delivery accelerates and a small bite of light at the end of the COVID tunnel becomes visible.
PolIcy Iapplications and Eexpectations for 2021
These updates from the Biden administration aree nothisurprising ng; they are more intended to save time than anything else.
TThe most interesting observation from this policy update is that the Biden administration has basically said, “We have this. Homeowners in trouble need help, and we don’t need Congress to help. ”
Whether people realize it or not, hiseems that the Biden administration threw into the towel when it comes to counting on Congress adopt meaningful legislation In regards to borrower service requirements or new protections.
We are in a post-CARES Athe world where CARES established the foundationion for tolerance, and now it is at agencies and investors to support owners through the turmoil.
As to what to expect in the coming months, there have been rumors about an extension of the foreclosure moratorium until September 30, and some expect abstention extensions to finally cover a period of 24 months in total.
The main driver of the political roadmap is, unsurprisingly, the permanent need for economic relief as the pace of vaccine distribution pushes the return to normal halfwayyou 2021.
Other policy drivers to keep listen:
- Unemployment rate slightly improving (unemployment rate of 6% in April, against 6.7% in December)
- The COVID relief bill passed in early March, which included a third round of stimulus checks for many Americans
- K-shaped recovery impacting different market sectors
- Tax reform on the table, influenced by Senate moderates
AShifting Rregulatory VSlimate
From a regulatory standpoint, the philosophy of the Biden administration is that “staff is Politics, ” and the first person named by Bidens at CFPB / HUD / OCC will be the key to guiding their policy agendas.
A Democratic majority in the Senate encouraged the new administration to pursue more aggressive candidacies, including Warren-endorsed Rohit Chopra for CFPB director.
However, with such a narrow margin of majority, the Biden administration will have to respond to a more moderate agenda if thThe goal is to get meaningful legislation passed through Congress.
Lenders are gearing up for a more rigorous era of CFPB enforcement, and it may be on the horizon. CFPB is in the middle of a hiring frenzy, and a CFPB led by Chopra should increase funding requests and demonstrate enhanced capacity for equitable loan application, development of processes to initiate investigations, and collaboration with state mini-CFPBs.
On February 23, CFPB announced that it plans to propose a rule to extend the compliance date of the new Qualified Mortgage (QM) rule to July 1, 2021 in order to give lenders more time to make QM loans ineir DTI ratio or Fannie / Freddie eligibility.
The CFPB also hinted that it might review the QM’s Seasoned Final Rule and, at a later date, consider whether to start further rule making to reconsider other elements of the General QM rule.
Other regulatory influences to keep in mind:
- FDCPA rule finalized in November
- Reg X / Loss Mitigation Rules Updates Expected In Spring
- HUD expected to focus on affordable housing initiatives and enforcement activities around forbearance and services related to the CARES Act.
- OCC / Fed / FDIC focus on the Community Reinvestment Act
Forbearance Volume Stays Steady as Servicers Prepresentative for Loss Mhe Wave
On the abstention front, MBA abstention volume data through March 28 shows reasons for cautious optimism; The volume of forbearance is slowly trending down, with the total share of mortgages in forbearance declining every month since its peak in June 2020 (see Figure 1).
Unfortunately, abstention figures have mostly been consistent since October, still at 2.5 million borrowers in total.
Figure 1: Total abstention volume
Although total abstentions are decreasing slightly, it should be noted that 84.1% of forbearers extended their forbearance (see Figure 2), while forbearance outflows slowed to a ramp.
Figure 2: Forbearance extensions
Good news (for managers and borrowers) is this: We are not rushing into a foreclosure crisis ala 2008.
According to the Urban Institute, borrowers this time around have a lot a stronger buffer on home equity against foreclosures thanks to the price of the house appreciation. Borrowers with government guaranteed mortgages have an average capital buffer of 22% (with only 3.6% of borrowers having negative equity).
Traditionally, 20% principal is the turning point where borrowers are seen to have a strong enough financial incentive not to give up on mortgage repayment efforts.
But as the volume of abstention remains stable, services need to step up their loss mitigation cascade to prepare for the wave when tides tower and the tolerances finally expire for good.
Agents should ask themselves, “How can I make sure that our servicesng up to date with the latest policy updates? How do we make sure we are in compliance with the new policies and how do we communicate these policy changes to our clients? How can we make sure that our loss mitigation cascade is accurate? ”
For many borrowerss, the Biden administration’s latest forbearance and foreclosure extensions have extended their trail to loss mitigation. however, policy relief can only last so long, and maintenance workers need to arm themselves with powerful fault management technologyogy now to measure their loss put capacities before things start to escalate.
While 2020 has been characterized by a series of unfortunate events, may 2021 will be characterized by our painjealously slow down, constant recovery from these events.
WAs things improve and agencies step in to help, service agents still face many challenges.
Here is Three Key takeaways for service agents as we head into the second quarter:
1. Prepare for a new wave of borrower applications
TThe forbearance and foreclosure extensions we saw in mid-February mean managers need to prepare for a new wave of borrowers as they need fast forbearance extensions.
By now this should be old, because the servers have evolved their support teams through COVID to manage increases in borrower requests.
2. Renewal of borrower training efforts and Sensitization
We always hear about it persistent problem with borrowers whose forbearances are about to expire (or have already expired) who are unaware that they should explicitly request extensions from their servers. This has resulted in hundreds of thousands of borrowers who are unnecessaryy delinquents who are ignore awareness of their agents.
This will continue to be a problem, because there will be borrowers who do not understand that they must reach out to request these two new periods of three month forbearance extensionsp the first 12 months offered by the CARES law.
Proactive borrower awareness and education campaigns will be necessary to help borrowers who flirt with delinquency understand that they can access additional help in times of difficulty.
It is on servedto ensure they are properly pushing policy updates to owners on a timely basis, distilling complex policies and shifting timelines into streamlined, easy-to-understand updates for owners.
3. Make sure your tech stack can handle everything
Agents face a Herculean task: providing real-time care while complying with complex rule changes.
Fannie Mae’s recent mortgage lender sentiment survey found that 45% of managers say following investor policy changes was their biggest or second biggest COVID challenge.
Good maintenance technology can (and should) reduce this friction.
In a climate of tumultuous maintenance, it will be the repairers with powerful interview Technology who will emerge from COVID with stable and happy borrowers and a competitive edge in the market.
The seamless interaction between Loan service, defect management and customer service platforms illustrate how services can scale to every CARES rollout with modern borrower self-service and real-time configuration (rather than coding) to comply with real-time policy changes.