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Mortgage Forbearance Exits 101: What the Forbearance End Date Means for Housing Agencies

Welcome to the second 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 response to COVID-19 and included in the American Rescue Plan Act, the Homeowner Assistance Fund (HAF) is a federal program created to help homeowners as they navigate financial hardships. Through the program, the United States Treasury Department is providing states with a total of approximately $9.9 billion, with each state receiving a minimum of $50 million. States will be using this funding to assist eligible homeowners with mortgage payments, homeowner’s insurance, utility payments, and other costs causing financial strain. As forbearance numbers drop at a rapid rate, the number of homeowners under financial strain is rising, making the HAF even more beneficial.

What role can the HAF play as borrowers exit forbearance?

The pandemic caused millions of homeowners to fall behind on mortgage payments and various housing-related expenses. Established on January 21, 2020, the HAF was designed to help homeowners catch up with such expenses. To maximize the fund’s impact, the program prioritizes funding for homeowners who have undergone the most grievous financial hardships due to the pandemic.

What qualifies as a financial hardship?

Homeowners who experienced income reductions or living expense increases due to the COVID-19 pandemic are less likely to be able to avoid mortgage delinquency, mortgage default, foreclosure, and loss of utilities or home energy services. The Treasury designed the HAF program to help homeowners avoid these types of scenarios and the funds are only to be used as a resource to address the aforementioned circumstances.

Who will get HAF funds?

Each state will be allocated a sum by the Department of Treasury. This sum will be determined by the number of unemployed individuals, number of borrowers with mortgage payments that are 30 days past due, and number of mortgages that are currently in foreclosure. In order to access these funds and be of assistance to homeowners, housing agencies had to submit plans that described how they will use the HAF funding to fulfill the program’s goals. Here are a few elements that housing agencies were required to include in their HAF plans:

  • The targeted population of homeowners and the financial challenges the program would address based on the data-driven assessment of homeowner needs
  • Eligibility requirements
  • Intended impact on eligible homeowners
  • Conditions and limitations of the funds, including the maximum dollar amount that the program will provide to each homeowner for each type of qualified expense
  • A description of the payment process
  • Other available sources of assistance for targeted homeowners

What role will housing agencies play as HAF programs start and forbearance numbers continue to drop?

Depending on when housing agencies have access to the HAF and how it’s distributed, these funds could be a crucial element in helping homeowners stay afloat and avoid foreclosure. While these funds will help families across the U.S., the surge in applications will be overwhelming for housing agencies trying to help Americans avoid foreclosure.

Black Knight’s August 2021 Mortgage Monitor Report shows that the number of active COVID-19-related forbearance plans dropped below 1.6 million in September. This is the lowest volume since the pandemic first hit. With another 500,000 plans set to expire in October and over 300,000 in November, the number of homeowners seeking financial assistance will only increase, making a surge in HAF applications and an increase in housing agency challenges incredibly likely.

According to Dana Dillard, principal at consultancy Housing Finance Strategies and a former mortgage servicing executive, difficulties for housing agencies helping homeowners are to be expected. “The timing is complicated because you have customers rolling off forbearance, ready for help, but the state program might not be up and running,” she said.

Between getting programs started up to assist borrowers as they exit forbearance and the surge in applications that will come once programs have started, housing agencies have a busy, overwhelming period ahead of them.

How can housing agencies overcome challenges and effectively help struggling homeowners?

HFAs strive to provide homeowners with the assistance they need when they need it. And funding is only part of the equation when it comes to providing this assistance through the Homeowners Assistance Fund. The other part is having the resources to complete the work. Housing agencies need enough qualified personnel and the right mortgage technology solution.

Luckily, MetaSource has the team of experts and the technology you need to provide the assistance homeowners need. With unmatched experience in the mortgage industry, MetaSource is already helping HFAs meet the goals of the Homeowners Assistance Fund. No need to have your current staff work overtime or hire more full-time employees. With MetaSource’s staff augmentation, information technology, and years of experience working with HFAs, we are fully equipped to support you.

Contact us to learn more about our HAF solution for housing agencies. Or if you’d like to see how MetaSource can further assist your housing agency, check out our Whole Loan Purchase Review Service, Loan Boarding Solution, MERS QA Solutions, Mortgage Lien Release Service, and Assignment of Mortgage Service.

And don’t forget to check out the other blog posts in our Mortgage Forbearance Exits Series: How to Navigate the Surge of Forbearance Exits and How Servicers Can Better Assist Borrowers Exiting Forbearance.

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