In April, the Consumer Financial Protection Bureau (CFPB) put in efforts to strengthen protections for pandemic-affected struggling borrowers through a host of proposals. The proposed rules aim to discourage servicers from initiating foreclosures until after the end of this year, encouraging them to offer certain streamlined loan modification options to borrowers.
As per CFPB acting director Dave Uejio, the proposed changes “will ensure servicers and borrowers have the tools and time to work together to prevent avoidable foreclosures, which disrupt lives and inflict further costs on those least able to bear them.” According to the CFPB, nearly 3 million homeowners have fallen behind on mortgage payments.
While this step is a move in the right direction, there are experts who argue that it’s still not enough to address the oncoming surge in foreclosures. The times are still challenging, and more mortgage holders are behind on payments than at any time since 2010, according to the Bureau.
The Federal Housing Agencies’ foreclosure moratorium on federally backed mortgages expires on June 30. After that, there are chances that banks and servicers may not be able to afford to grant deferrals and to take a hit on their bottom lines. Eventually, it is likely that some families may end up losing their homes considering that with reduced or no incomes, many Americans may not be able to afford their housing payments.
Overall, foreclosure is not a preferred option either for borrowers or servicers since it is a time-consuming and expensive process. According to a 2020 working paper from Stanford University, foreclosures have a long-term impact on people’s financial health, including loss of assets and missed payments on other forms of debt.
However, there will likely be a time in the future when loan modifications will start rising up and servicers may not have the capacities to suddenly increase scale. It is necessary that they are prepared ahead of time to respond to the situation. Associating with the right external parties is a solution to quickly ramp up capacity. This way, when the time comes to scale down, servicers will not be required to incur additional fixed costs.
Servicers can join hands with the right kind of partners who can help manage the operational challenges of loan modification and loss mitigation through more efficient, coordinated, and streamlined efforts. These partners can help with customized technology and infrastructure to aid mortgage service companies in enhancing their operational efficiencies during foreclosures. They can offer competent and scalable support tuned to the exact requirements of servicers in streamlining the loan modification process.
Moreover, joining hands with a partner means default access to the latest technology. When the volume of foreclosures and loan modification requests goes up, it is necessary that servicers have access to strong technology platforms that can offer superior customer experience and accuracy in decisions.
Here are some ways in which the right partnerships can significantly streamline servicing to help meet the increasing demands for loan modifications, while also improving customer experience:
Automated Request Allocation
As the number of forbearance or loan modification requests starts piling up, servicers will need to manage a series of incoming communication from borrowers. These could be requests related to forbearance, default, or other routine requests/complaints. A robust mechanism is a must-have to sort through these incoming requests, and then allocate them to relevant processors.
Solutions like a smartly designed Mailbox Monitoring system can help servicers manage forbearance and other default-related requests with a high level of quality and consistency. Such platforms can ensure that every request coming in is allocated to the relevant processor, in time and SLAs for response are defined clearly.
Engage With Borrowers on Loan Modifications
With larger loan applications come aspects like stricter deadlines, more documentation, and rigid compliance regulations. It is important to comprehensively communicate with borrowers and take them into confidence so that the process remains smooth and easy. Even the CFPB has proposed that servicers should engage with borrowers and inform them about the options available to them.
Third-party partners can engage with borrowers regularly on behalf of servicers and ensure that the flow of communication is consistent.
Underwriting is a critical aspect of the loan modification process as underwriters are the first line of defense against unscrupulous borrowers. For this, all the documentation is required to be right, to prepare ahead for underwriting. Third-party partners can conduct the process of reviewing a loan file before sending it ahead to identify anomalies early on. They can handle the verification of all information supplied by borrowers by engaging effectively with them. They also provide vital pre-underwriting support services.
Companies like PrivoCorp are prepared to assist servicers by offering expert assistance with loan modification processes. We help servicers establish streamlined workflows to efficiently meet the rising volume of loan modification and loss mitigation demands through standardized processes. Get in touch with us today. To connect further with PrivoCorp, you can get in touch at email@example.com