BLOG VIEW: The mortgage market has been significantly affected by the COVID-19 pandemic. With severe job losses and layoffs, many homeowners are struggling to pay their mortgages – and servicers are having to deal with a large number of default cases. The Mortgage Bankers Association (MBA) recorded a historic surge in mortgage delinquency rates in the second quarter – to a nine-year high.
Just as mortgage servicers were preparing to handle the deluge of communication from borrowers, the CARES Act was enacted to offer financial assistance and relief to alleviate the economic impact of the pandemic. Besides its other requirements, an important mandate of the Act is that a borrower who raises a forbearance request should be acknowledged on priority. If an appropriate response is not provided within five business days, it can lead to compliance challenges. Lack of default processing oversight can result in hefty penalties: Recently, the Consumer Financial Protection Bureau (CFPB) ordered a major servicer to pay $1.5 million for foreclosure issues.
While mortgage servicers are not new to challenges, in terms of excessive default risk brought on by natural disasters, in today’s context, the risks for default servicing are mounting exponentially. As federal, state and investor requirements continue to shift, the mortgage ecosystem is facing continuous challenges with an increasing number of natural disasters and the resurging pandemic. Now is the time for servicers to re-evaluate how rigorous their processes truly are – and what they should do to improve them.
At a time when more than 3.6 million or about 7.2% of mortgage borrowers are in forbearance, mortgage servicers are in need of an immense amount of manpower. In the month of April, when homeowners were calling in with forbearance requests, the average hold times were up to 13 minutes, straining servicers’ call center staff and, of course, the homeowners’ patience. Although mortgage is a seasonal and fluctuating business, it is not easy to suddenly scale-up operations by hiring a massive team, only to lay employees off later when the pressure subsides.
Therefore, servicers must explore other options, such as offering self-help solutions to borrowers that eliminate the need to go through a call center. Although a human interaction goes a long way in easing borrower stress, self-help options made available to borrowers via vibrant technology are helping servicers save time and reduce human involvement.
Instead of risking compliance defaults, self-help options are working for both borrowers and servicers, where the former gets relief request submitted immediately, and the latter relieves strain on call centers. Servicers are able to offer faster results and clearer communication via self-service portals that eliminate the need for numerous customer phone calls. This level of automation also frees-up a servicer’s teams, who can then focus on handling other high-touch activities like helping borrowers finalize applications and advising on future scenarios – rather than spending time answering calls. Through digital self-help options, servicers can set the ball rolling for an improved recovery process.
Another important element in ensuring proper compliance – including clear and timely communication with borrowers. Servicers may pick up whatever digital channels of communication they consider to be effective, however, the focus should be on delivering clear, timely and relevant communications that can minimize the uncertainty related to the situation. Servicers that can maintain proper communication are more likely to ultimately build trust and strengthen their relationships with their borrowers.
While communication is critical, mortgage servicers also need to ensure that they empathize with the borrowers – many of whom are clearly dealing with very anxious situations like job losses – or the loss of a loved one. They deserve to get clear answers and a precise action plan; it is up to servicers to help relieve borrower stress.
Even though sticking to facts is important, servicers need to offer empathy through compassionate communications across all channels – social media, email, phone as well as website – to borrowers who are looking for help. This is especially important because the CARES Act was passed quickly, without full implementation details. This meant that borrowers had many questions due to initial uncertainty about how forbearances would be implemented.
Even servicers may not have all the details. Even in the case, they should send out a message to borrowers explaining that they are awaiting further details. This can go a long way toward earning borrower trust.
Another important task, in terms of compliance, is ensuring that the processing of requests – including forbearance, default, or other routine requests/ complaints – is efficiently carried out. Deploying a robust tech-based mechanism is an essential way that servicers can manage the rising forbearance, repayment and loan modification requests. The technology should be quick to implement and easy to use especially when time is of prime essence.
At this time, mortgage servicers urgently need a scalable solution that can be on-boarded fast, and that can help deliver operational efficiencies while reducing TAT times and servicing cost. Robotic process automation is a key consideration in this challenging environment.
In these tough times, servicers need to put their best foot forward and come up with innovative solutions for all the stakeholders involved. The need of the hour is to adapt new ways of thinking, automate with technology, and operate with agility to ensure proper compliance.
Sam Verma is president and CEO at Peoples Processing, an outsourcer offering origination and servicing processes. Peoples Processing is a division of Direct Mortgage Corp., a mortgage banker licensed in multiple states that conducts wholesale and correspondent business.
