From the unforeseen effects of the pandemic to an 11-year-mortgage volume high, the past year has been ground-shifting for mortgage servicers.
Servicers faced several challenges, with the impact of the CARES Act being among the most notable. After all, it resulted in forbearance plans that millions of homeowners took advantage of.
In fact, according to the MBA’s May 18, 2020 press release, loans in forbearance made up 8.16% of servicers’ portfolio volume, with 4.1 million homeowners in forbearance plans. Black Knight’s data shows that this number decreased significantly by the end of December, dropping to nearly 3 million homeowners, or about 5.3% of all active mortgages. The MBA’s National Delinquency Survey data shows the 2020 seasonally adjusted delinquency rate dropped from 8.22% in the second quarter to 6.73% in the fourth quarter.
But despite the rapidly changing mortgage servicing landscape this last year, servicers continued to struggle with the same quality control challenges that have plagued them in years past, a MetaSource analysis of servicing QC findings shows.
Among the 10 most common findings from among thousands of servicing QC audits the MetaSource team conducted over the past year were many that reflect an ongoing struggle with missing documents as well as oversights likely exacerbated by a year of unprecedented pressures. Here’s a look at the findings list along with insights into why they occurred – and how to avoid them in 2021.
Most Common Servicing QC Findings
Here is the list of our top 10 mortgage servicing QC findings:
- Incorrect set-up and timely premium payment of taxes, insurance and mortgage insurance
- Missing or incomplete lien release documentation in accordance with applicable state and county guidelines
- Failure to post mortgage payment within 24 hours of receipt
- Failure to post effective date of when mortgage payment was received
- Incorrect set-up of hazard insurance policy premium amount and due date
- Failure to send annual escrow account statement to borrower within 30 days of the end of the computation year
- Incorrect escrow, principal or interest amounts, borrower name, property address, or calculation of interest rate
- Missing or out-of-date flood insurance documentation
- Failure to send Borrower Solicitation Letter within 45 days of delinquency
- Failure to send Breach of Acceleration Letters by the 60th day of delinquency
Root Causes of the Top Findings
Bret Cline, MetaSource Servicing QC Manager, says missing documents are to blame for many of the findings. Missing flood insurance, for example, may be how a defect is initially identified, but it’s often just that the flood insurance documentation is missing – not the actual policy on the loan.
Missing documentation is a huge source of wasted time – and an obstacle that will only be compounded when the CARES Act forbearance window begins to close for many borrowers.
“Once it ends,” Cline says, “there could be tens of millions of loans in foreclosure.”
Servicers whose processes routinely leave them searching for missing documentation could find themselves overwhelmed – or worse, unable to move forward with foreclosures when necessary.
In addition to missing documentation, Cline states that the pandemic-driven CARES Act, which put millions of borrowers into temporary forbearance, put significant pressure on servicers. “There are many borrowers not making their payments,” he said. “And most servicers are so focused on the CARES Act that they may be overlooking other issues.”
Set-up errors were the cause of many findings over the past year as well. Among the most frequent oversights identified were the details and due dates set up for the payment of taxes and insurance. Errors in set-up can lead to double payments or shortfalls. Either way, it’s a problem that can diminish a servicer’s relationship with borrowers.
Servicers also frequently failed to properly document the receipt and effective date of monthly payments. Many even failed to ensure that the borrower’s name and property address were correct. These errors also led to findings, not to mention financial leakage.
How to Avoid Findings in 2021 & Beyond
At MetaSource, we have decades of experience helping mortgage servicers improve their processes and their documentation, along with deep insight into where the pitfalls lie. With an overwhelming year in mortgage servicing upon you, avoiding findings means being prepared.
A third-party servicing audit is often a good place to start. MetaSource offers a wide array of servicing audits to help identify and root out the issues holding you back or putting you at risk of non-compliance and financial losses:
- 1098/1099
- 203K/Home-style
- ARMs
- Assumptions
- Bankruptcy
- Cashiering
- Claim Submission
- Credit Reporting
- Customer Inquiries
- Default Administration
- Escrow Administration
- FEMA/Disaster Recovery
- Foreclosure
- Hazard Insurance Claims
- Lenders Placed Insurance (LPI)
- Loan Setup
- Loss Mitigation
- Payoffs
- Service Members Civil Relief Act (SCRA)
- Service Transfers
- Fair Debt Collection Processing Act (FDCPA)
State-of-the-art software for document ingestion, classification and workflow is also key to avoiding servicing QC findings. From business process outsourcing (BPO) solutions that put an end to “stare and compare” reconciliation to the loan boarding, workflow and storage capabilities of platforms like MetaStor® and MetaWorx®, we provide end-to-end mortgage document processing and expertise that can help you ensure compliance.
With the right solution, you can put an end to your servicing QC struggles this year— even as the industry undergoes further changes in the post-forbearance era, which happens to be drawing nearer and nearer. According to data provided by the MBA’s Research Institute for Housing America (RIHA), the number of missed mortgage payments is already declining. The data shows that on average, 2.57 million households missed monthly mortgage payments in the fourth quarter of 2020. In March 2021, however, this number dropped to 2.33 million households.
To prepare for what’s to come this year, you need a solution that alerts you to missing information and documents and provides you with comprehensive visibility into the accuracy and efficiency of your processes. Fortunately, MetaSource can supply you with a solution that does all this – and more.
Contact us today to learn more about our service and technology offerings or click on the link below to download our free Servicing QC Whitepaper, which provides you with all you need to know about Servicing QC requirements.