Post the pandemic, the US is looking at a potential uptick in mortgage foreclosures. Given that the moratorium on foreclosures was lifted in July 2021, mortgage companies can now act on delinquent loans, bankruptcies, and default scenarios. For December 2022, foreclosure starts were up 72% from a year ago.
This could go on through 2023, considering that the economy is facing inflationary pressures. Combined with layoffs in the tech sector, it is likely that the industry is bracing for a mortgage foreclosure wave. Nonetheless, there are several steps servicers could take to optimize loan foreclosures.
How Mortgage Foreclosure Process works
A mortgage foreclosure happens when the borrower ends up missing several consecutive payments. However, it’s not a sudden step. When the borrower first misses payment and causes a default, it’s the servicer’s job to reach out and notify them.
In most cases, if it’s a lone missed payment and the borrower will pay the amount soon enough. Unfortunately, if they miss another payment, the servicer’s team will have to reach out and work with them to resolve the issue.
After 90 days, an official letter is sent by the servicer demanding an acceleration in payments. At this point, there are three ways to deal with this: the borrower can make payments and address the issue, the servicer and borrower can work together to modify the loan or the last resort is it may have to move towards a mortgage foreclosure.
As per law, mortgage foreclosure proceedings can start only once the borrower is 120 days or more past their due date. There may be nonjudicial or judicial foreclosures depending on the state you are based in.
The next step is to get ready for foreclosure auction. Servicers generally advertise the property and line up the auction to be arranged within a few months after the notice of default. The highest bidder gets the property, after looking at any outstanding liens, taxes and other costs in connection with it. If there is no feasible bid, the servicer becomes the owner and may try to sell the property through a broker. This is the step where property preservation also plays a role.
The last step is eviction, which can be done any time after the auction. Servicers may allow several days of leave so that the occupants can shift their belongings.
Find out how PrivoCorp can help in improving borrower experience and retaining them
Preparing for Mortgage Foreclosure Uptick: What Servicers Need to Do
The year 2023 is likely to be a challenging year for servicers . It is possible that a fall in delinquency rates can lead to greater origination volumes and more business. However, a complex market means that there could be a rise in mortgage foreclosures.
To deal with the situation, mortgage servicers can take the following steps:
1. Automation and Cohesive workflows
For a seamless mortgage foreclosure, there are many stakeholders involved in the process from many organizations. This includes the lender, other firms acting on their behalf, legal counsel and courts, regulatory agencies, legal teams representing the borrower and so on. It is imperative to have a cohesive workflow that keeps all of these stakeholders informed in case of a new development. This will also bring in automatic data transfer across different systems, check documents, request approvals, and so on.
2. Boosting Capacity
A mortgage foreclosure is a time-taking process. If there is no way to avoid it, servicers have to be prepared to work at maximum service capacity to process it effectively. Oftentimes, servicers will with borrowers to offer loan modifications and avoid foreclosures.
In case of a mortgage foreclosure, it is best to work with reliable and trusted partners who lend assistance at every stage. They are available to ensure that every process from pre-foreclosure, to auction to handover stages and property preservation take place smoothly. When mortgage foreclosure volumes rise suddenly, outsourcing is helpful and cost-effective since the servicer does not have to scale up or add any permanent resources.
3. Data-Driven Solutions and Analytics
Data analytics plays a key role in managing a spike in mortgage forecloses. Predictive modelling and business intelligence dashboards help keep track of the loan health, default risk, and servicing progress for all borrower relationships. This gives lenders leeway to anticipate the number of mortgage foreclosures in a fiscal year and prepare themselves accordingly. Advanced analytics even have the capability to offer suggestions on how to alleviate risk and prevent foreclosures via servicing data analysis.
How PrivoCorp Can Help in Mortgage Foreclosure
PrivoCorp can lift the burden for mortgage servicing off your shoulders by offering expert assistance. We offer comprehensive mortgage foreclosure and loss mitigation services to aid lenders. We help lenders establish streamlined workflows to efficiently meet the rising volume of foreclosures through standardized processes.
We offer a broad spectrum of services including Foreclosure Referral, Foreclosure Timeline Management, Foreclosure/Bankruptcy Invoice Recon, Foreclosure Executed Document and more. Our expert team of professionals engages effectively with borrowers and we provide access to advanced technology-oriented tools.
Get in touch with us today to know more about our services.