Mortgage Forbearance Exits 101: How to Navigate the Surge of Forbearance Exits
Welcome to the first blog post in our Mortgage Forbearance Exits Series! This series covers relevant topics and provides tips for navigating the market during this stressful time.
In March 2020, the federal government enacted the Coronavirus Aid, Relief, and Economic Security (CARES) Act to assist homeowners facing pandemic-driven financial hardships. Under the CARES Act, borrowers with government-backed mortgages who were struggling to make their payments due to the pandemic were entitled to enter into forbearance. Initially, the CARES Act forbearance period was meant to last 180 days with an optional 180-day extension, but homeowners’ continuous struggles resulted in several extensions.
Now, a year and 6 months after the CARES Act was enacted, the time has come for millions of borrowers to exit their forbearance plans and resume making their monthly mortgage payments. For servicers, this translates to one incredibly stressful period.
What challenges are servicers facing as forbearance programs end?
The world of mortgage servicing is overflowing with more than just forbearance exits. As a result of the moratoria ending, it’s also overflowing with challenges.
Increased Workload & Stress Levels
According to Black Knight’s July 2021 Mortgage Monitor Report, over 1 million active forbearance plans were set to expire in September and October with another 200,000+ loans scheduled for review in November. This leaves mortgage servicers with an extraordinary amount of daily to-do’s and not enough bandwidth to complete them.
Enhanced Scrutiny from the CFPB
While some borrowers are able to start making their payments again post-forbearance, many have continued to struggle financially and are unable to do so. Servicers are responsible for helping these borrowers avoid foreclosure through loss mitigation strategies.
However, many borrowers who have already exited forbearance did so without a loss mitigation strategy. According to the Mortgage Bankers Association’s (MBA) September 12, 2021 Forbearance and Call Volume Survey findings, 16.4% of borrowers who exited forbearance between June 1, 2020 and September 12, 2021 did not have a loss mitigation plan in place. Did this result in an increase in foreclosures? Black Knight’s recent press release provides some insight. It states that with 7,100 foreclosure starts, August marks the highest foreclosure initiation volume in 8 months.
In an attempt to minimize foreclosures and ensure borrowers are provided with all available loss mitigation options, the Consumer Financial Protection Bureau (CFPB) announced that it will keep a close watch on mortgage servicers to ensure they are providing borrowers with the help they need.
The bureau issued new rules that include temporary special safeguards that provide borrowers with the time they need to explore foreclosure alternatives. These rules require mortgage servicers to effectively communicate with borrowers regarding their loss mitigation options.
Under these new rules, foreclosure is only allowable in the event homeowners are over 120 days behind on their mortgage payments, have abandoned their property, have been unreachable for more than 90 days, or have no available foreclosure avoidance options.
These new rules, along with the CFPB’s promise to closely monitor activity, have resulted in an increase in pressure for servicers to handle the surge of forbearance exits properly.
Rising Correspondence Volumes
In addition to the CFPB’s watchful eye and regulations, mortgage servicers are challenged by the high volume of incoming mail. Many servicers are particularly struggling to manage these communications. Why? Because they lack the solution required to process incoming mail in a timely manner and avoid both losing and overseeing documents.
And to make matters worse, failing to keep up with increasing correspondence can result in more than just underserved, unsatisfied borrowers. It could also lead to legal ramifications – especially as the CFPB cracks down on mortgage servicers.
What can I do to efficiently prepare for the surge of forbearance exits?
Now, you know what challenges lay ahead. But how can you overcome them? How can you provide borrowers with the assistance they need as they exit forbearance and meet the CFPB’s expectations with such high volumes of incoming correspondence?
The answer is simpler than you may have thought: Adopt a digital mailroom.
What is a digital mailroom?
Simply put, a digital mailroom replaces the manual processes of a physical mailroom with automated ones that require little-to-no human intervention. The best digital mailroom solutions streamline the entire mail process – from retrieval to delivery to storage. Such a solution can significantly reduce your workload and allow you to access borrower correspondence from anywhere, so you can mitigate today’s mortgage servicing challenges.
How does a digital mailroom work?
When you adopt a digital mailroom, your incoming mail is automatically delivered to the right department or person, making routing, reviewing, approving, and locating documents significantly more effective. Here’s how it works:
- Retrieval: Your partner either picks up your incoming mail or has it directed to one of their facilities.
- Preparation: Your partner sorts, scans, and digitizes your mail.
- Delivery: Your mail is automatically delivered to the right person or system.
- Storage: Authorized personnel can then access the files anywhere, at any time via a secure, cloud-based repository.
What are the benefits of a digital mailroom?
Now that you know what a digital mailroom is and how it works, it’s time to dive into just how the right solution can benefit you during this surge of mortgage forbearance exits.
A digital mailroom allows you to process your mail notably faster, making handling your high volumes of incoming correspondence not only doable, but easy. You can act on time-sensitive files quickly and provide borrowers with the assistance they need (and the assistance the CFPB expects). This means employees will have more time to focus on core tasks while they are adjusting to this sudden overwhelming amount of work.
With a digital mailroom, you can:
- Quickly access borrower correspondence from anywhere, at any time.
- Enhance customer engagement as the marketplace stabilizes.
- Reduce document storage costs by limiting physical storage.
- Improve compliance with increased confidentiality and security.
- Streamline mortgage servicing processes by eliminating information extraction, document indexing, and paper file retrieval inefficiencies.
How can MetaSource help?
MetaSource is dedicated to assisting servicers like you navigate the surge of mortgage forbearance exits today and streamline processes for the future. We have offices across the U.S. that can expeditiously and securely receive and process your incoming documents. With over 30 years of experience in high-volume document scanning, document management, and digital mailroom, MetaSource is a global leader in digital transformation. Combine that with our unmatched mortgage compliance expertise and industry experience, and we are fully equipped to assist you during the surge of forbearance exits and beyond.
Contact MetaSource to find out how to start outsourcing your mailroom or download our Mortgage Digital Mailroom Whitepaper now to learn more about how a digital mailroom can help you efficiently optimize your organization’s processes, provide borrowers with the assistance they need as they exit forbearance, and better prepare for the future.
And don’t forget to check out the other blog posts in our Mortgage Forbearance Exits Series: What the Forbearance End Date Means for Housing Agencies and How Servicers Can Better Assist Borrowers Exiting Forbearance.