25 Feb, 2021

The Need for Mortgage Loan Modification

The_need_for_Mortgage_Loan_modification

Even as vaccines have offered some hope that the economy could be back up on its feet in the second half of the year, the months before that are likely to remain challenging. The private sector has added just 6,000 jobs, hardly much to register against the millions of positions lost during the pandemic. There are still nearly 10 million fewer jobs than there were before COVID.

In some positive news, the Federal Housing Finance Authority (FHFA) and Department of Housing and Urban Development (HUD) announced another extension of its foreclosure and eviction moratorium through March 31. But once these forbearance protections run out, there is a looming fear of a wave of foreclosures in 2021.

Foreclosure is hardly a preferred option for either borrowers or servicers because the repercussions on either party are immense. For borrowers, a foreclosure will result in the loss of their home and will lead to a number of expenses in the form of foreclosure fees, additional legal fees, and possibly a deficiency judgment if their outstanding liens exceed the current value of their home. Their credit score and credit report will also be affected negatively when all is done.

For servicers too, foreclosure is the last resort, and most would prefer to work something out with borrowers. Foreclosure is a costly affair; the processes are reasonably complex and they do take time to sort out. It is a cumbersome solution to the problem of the defaulting borrower. Besides, it can produce vacant and abandoned properties, because as soon as the residents receive notice that the house will be going into foreclosure, many are prompted to vacate the premises before getting thrown out. During this period, the property is likely to deteriorate considering there’s no one to take care of it, and its value will diminish.

However, considering the current situation where the economy is yet to see a very drastic revival, many of the affected households will continue to have lesser income than before the pandemic. Many of these families could end up facing foreclosure. This means there could be a wave of foreclosures in 2021, particularly if the economic impact of the pandemic lasts longer than has been expected.

What this means for mortgage servicers is that it could be tough to deal with the incredible operational challenges that the wave of foreclosures can create. Servicers will try their best to offer loan modification and other loss mitigation options considering that on average, a performing mortgage loan costs 12 times less to service than a non-performing one.

Yet, all of these procedures would require high coordination efforts revolving around several operational procedures and touch points which could mean significant overheads in terms of default servicing. All of this also means additional paperwork and lenders requiring to depend on timely, accurate, and prudent underwriting. Loan modification underwriting is an important step since underwriters are the first line of defence to ensure that a borrower represents himself and his finances truthfully and accurately.

All in all, the impact of rising forbearance, loan modifications and mortgage defaults can be extremely tough for underprepared servicers. Scaling up large-scale loss mitigation initiatives could lead to mounting administrative costs and slower cycle times, negatively impacting borrower experience. 

Associating with the right partners to handle loan modification, loss mitigation, or foreclosures

This is the time when it is extremely important for servicers to join hands with the right kind of partners who can help manage the operational challenges of loan modification through more efficient, coordinated and streamlined efforts.

Such service partners can help with tailor-made technology and infrastructure that can aid mortgage servicing companies to improve their operational efficiencies while saving time and costs when it comes to dealing with loan modification or foreclosures. They are capable of offering efficient support and scalable services tuned to their exact requirements.

Besides, associating with a partner means access to the latest technology. Considering a high volume of loan modification or foreclosures requests, it is important for servicers to make the most of robust technology platforms that provide several distinct advantages in terms of a superior customer experience, accuracy in decision making, and cutting down on paper documents.

How Peoples Processing can help

Peoples Processing can provide support by:

  • Offering expert assistance with the loan modification process and delivering an improved experience to borrowers.
  • Helping servicers establish streamlined workflows to efficiently meet the rising volume of loan modification demands through standardized processes and project-suited resources.
  • Providing an expert team of loan modification professionals and access to advanced technology-based tools.
  • Deploying and executing strategically planned loan modification processes by powering servicers’ existing system.
  • Enabling servicers through a broad spectrum of mortgage loan modification support services aimed at efficiently discharging end-to-end loan modification requests.
  • Streamlining servicer’s default and loss mitigation operations by engaging effectively with borrowers identified in default.
  • Offering end-to-end back-office activities associated with default and loss mitigation through a wide array of mortgage default management tasks, including collections, claims management, counseling, etc.
  • Empowering servicers through a smartly designed Mailbox Monitoring System that can help them manage forbearance and other default-related requests with a high level of quality and consistency. The Mailbox Monitoring System ensures that every request coming in is allocated to the relevant processor, in time and SLAs for response are defined clearly.

Summary:

With its industry-leading service profile and customizable process models, Peoples Processing is uniquely positioned to help mortgage servicers scale their operations and meet higher volumes. Get in touch with us today!

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