PERSON OF THE WEEK: Although the share of mortgages in COVID-19-related mortgage forbearance plans has been gradually decreasing in recent weeks, there are, nonetheless, about 3.9 million homeowners in forbearance plans, as of July 12, according to the Mortgage Bankers Association.
That’s almost 8% of all U.S. mortgages. Depending on the outcomes, that’s a significant percentage.
For mortgage servicers, the deluge of forbearance requests is likely over. The big question now is, how many of these mortgages will transition to delinquent status after the forbearance period ends? Obviously, the hope is that the economic impact of the pandemic will end, unemployment will fall to Q4 2019 levels and borrowers will get back to work. But with the virus rebounding in states including Florida, Arizona, Texas and California, it’s likely that a full recovery will take some time. It’s even possible that requests for forbearances will rise in the regions currently seeing increases in cases.
So what comes next for mortgage servicers and how can they deliver the best possible experience for struggling borrowers? To find out, MortgageOrb recently interviewed Daniel Sogorka, president and CEO at Sagent Lending Technologies, which offers the LoanServ loan servicing system.
Q: What have been some common pain points for borrowers over the last couple of months?
Sogorka: Confusion about mortgage relief will remain the biggest pain point for American homeowners in 2020. Mortgage servicers are in a strong position to clarify confusion and educate homeowners about ever-changing loan forbearance and modification rules and options. Here are two ways servicers can get this right:
Hybrid digital/human service: Although forbearances have leveled off recently, servicer call times have held steady, and call times may rise this summer as we hit the 90-day mark of the first wave of COVID forbearances. Servicers can augment this human customer care with real-time updates on forbearance status and options tailored to each borrower via phone app and email.
Real-time data for customers and servicers: Servicers’ customer care teams must have real time data about each homeowner, and this data must also be available directly to the homeowner via their servicing app. This data consistency drastically improves the homeowner experience, and also helps customer care teams give smarter, faster advice.
Q: What role do servicers play in helping homeowners make financial decisions?
Sogorka: A servicer can be a strained-homeowner’s greatest ally by combining a human touch with self-serve education. Self-service doesn’t mean homeowners must navigate complex processes and decisions on their own. On the contrary, smart self-serve tools empower them to learn about their loan options on their own time, and request human advice at any moment.
Q: How can servicers help borrowers navigate the “COVID economy”?
Sogorka: We’re now past the initial shock of statewide lockdowns and business closures, but servicers must ramp up support for homeowners as the economic fallout plays out for at least the rest of 2020. Even though the CARES Act allows for 12 months of forbearances, servicers typically implement forbearance requests in 90 day increments. Servicers can use smart systems to keep the education coming, and keep homeowners informed about their upcoming obligations and options well in advance of any forbearance period expiring.
And this might sound simple to the lending community, but we must keep reminding homeowners that – thanks to smart policy in Washington – missed payments can be added to the loan instead of becoming due when a forbearance expires. This simple message immediately relieves stress for strained homeowners.
Q: What will servicers need to keep in mind as forbearances become loan modifications?
Sogorka: Servicers were able to handle the initial wave of forbearance requests head-on, thanks to straightforward CARES forbearance policy, as well as GSE response. Additionally, smart software has allowed servicers to process forbearance requests very fast in this cycle.
Much to the credit of policymakers and GSEs, loan modifications have essentially been included into forbearances. As noted above, post-CARES policy allows for missed payments to be added to the loan instead of becoming due when a forbearance expires. This alleviates significant burden for homeowners and foreclosure risk for servicers.
That said, if a protracted recession scenario results in a spike in traditional loan modifications and deeper loss mitigation scenario, servicers can educate and engage homeowners by enabling real-time updates and action from any device, empowering customer-facing teams to share information in real time, and sharing data (while maintaining compliance) with lenders and borrowers simultaneously.
Q: What are the tools borrowers are looking for as they look to effectively communicate with their servicers?
Sogorka: Borrowers want instant communication on their own time, but with readily available human advice. Providing a suite of self-service tools is the best way for servicers to deliver an efficient, streamlined experience to their borrowers. The ability for servicers to offer these tools will be a key indicator of those who emerge from the COVID economy stronger than they were before.
Self-service tools make it easy for borrowers to:
- View updates on the status of their loan and forbearance;
- Manage their post-forbearance options and decision outcomes for different scenarios; and
- Interact with servicers and take action based on their advice.
Not only do these tools keep borrowers in control of their loan decisions, they make it easier for customer care employees to provide the information and advice borrowers actually need.
Self-service means reduced call volume, which means shorter hold times for the borrowers that need it most. Servicers that promote self-service tools help their borrowers be more independent while enabling customer care reps – the faces and voices of their organization – to provide a higher standard of service.