As borrowers impacted by COVID-19 continue to exit mortgage forbearance, now is the time for lenders and servicers to be proactive in their borrower outreach to reduce foreclosure volume. According to ATTOM Data Solutions, foreclosures have increased by 9% in the first quarter of 2021. And while foreclosure is sometimes unavoidable, lenders and servicers have an arsenal of tools at their disposal to help borrowers before that happens.
Less than two months after a missed mortgage payment, servicers typically contact borrowers to discuss potential options. However, it can be challenging to connect with borrowers. Computershare Loan Services (CLS) is one of the highest-rated servicers in the US. With deep roots in default servicing, Specialized Loan Servicing (SLS), part of the Computershare Group, helps clients mitigate a rise in foreclosures with contact strategies that meet borrowers where they are.
“Even before the pandemic, we were looking at ways to expand our communication,” said Leesa Logan, General Counsel of Specialized Loan Servicing. “Times are changing. Consumers don’t always answer the phone or look at their email. The old way of sending out letters isn’t always as effective as it once was.”
The CFPB’s Proposed Rule Amendments
The pandemic heightened the need for lenders and servicers to improve communication quickly. But even with the best efforts, it can be challenging to effectively manage consumer contact – especially when onboarding high origination volumes and navigating new rules and regulations.
In early April, the Consumer Financial Protection Bureau (CFPB) proposed new servicing requirements to give borrowers impacted by COVID, and servicers, more time to bring a loan current before moving toward foreclosure. For example, for principal residences, the Bureau would require a temporary COVID-19 emergency pre-foreclosure review period until the end of December 2021. Additionally, the proposed amendments would allow mortgage servicers to offer certain loan modifications more efficiently by requiring fewer borrower documents. If the modifications don’t increase the borrower’s monthly payment, servicers and borrowers can avoid the paperwork and focus on creating a payment plan.
While well-intentioned, these amendments require servicers to distinguish between a borrower’s principal residence versus a property that is vacant or abandoned, which can be challenging. Typically, an abandoned property can move forward to foreclosure. But an abandoned property is not the same as a vacant property, which can still be a consumer’s primary residence. Servicers must consider several different factors to make that determination. For example, someone in the military may leave a home vacant while deployed, but that doesn’t mean the house is abandoned and should go into foreclosure.
“It’s not easy,” Logan added. “Determining whether a property is abandoned requires communication with the borrower. But that’s something we focus on at Computershare Loan Services. We want to make sure if the property is vacant, we have some other qualifier that leads us to a reasonable belief the property is abandoned. If that is the determination, we may go ahead and move forward in the foreclosure if all efforts have been exhausted and in accordance with applicable legal and investor requirements.”
Computershare Loan Services streamlines communication
Computershare Loan Services designed its operational model to streamline communication with borrowers and remain compliant. CLS integrates digital tools into their day-to-day communication with customers to provide education on COVID-19 assistance opportunities, explain potential solutions when assistance ends, and provide multiple ways to contact SLS’s customer care team. Computershare Loan Services provides relevant information where and when borrowers prefer to receive it.
“Email, IVR, educational videos, and texting have all been very effective for us,” said Logan. “We get much more engagement by using a combination of these outreach methods. By using these tools, we have a very high rate of getting consumers out of forbearance and into a resolution.”
The CFPB’s new proposed rules put certain expectations in place when servicers contact borrowers. And while most servicers are already checking in with borrowers, they might not be in compliance with some of the additional contact requirements the Bureau is proposing.
“We’re looking at our current practice, identifying the Bureau’s intent, and ensuring we meet that intent,” added Logan. “And that’s something all servicers need to be doing in preparation for CFPB’s anticipated rule amendments.”
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