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DS News July 2020

DSNews delivers stories, ideas, links, companies, people, events, and videos impacting the mortgage default servicing industry.

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29 know what's available for sale in a consolidated format, request to see a property, go through a tour or inspections virtually, and place offers seems like the next road in development for U.S. real estate. Are you seeing impacts with regard to the foreclosure moratoriums that have been put into place? Yeah, absolutely. What we're seeing is the creation of a backlog. Putting a short- term moratorium in place while servicers and borrowers and governments all get their hands around what's going on makes total sense. We just need to say, "Hey, we just need to take a pause here and let the dust settle and figure out what we've got going on." e problem is that, the way they went about this moratorium, you've got a backlog of properties that were severely, severely delinquent. ere could be instances in New York, for example, where it had been scheduled, has been going through foreclosure for the last three years. Now they were very close to coming out and having a foreclosure sale and resolving that neighborhood blight that happens from that kind of abandoned properties or dilapidated properties. at's just now being put on the sidelines. It really is creating a drag on those neighborhoods and ultimately drag on home prices around those properties. e other concern is around what the restart process looks like. Because they were so prescriptive and this moratorium's about not initiating foreclosure, not advancing foreclosure, and not conducting foreclosures or evictions, it stopped everything in its tracks. Once these moratoriums are over, it's going to be a lot of work to figure out, "What steps need to be started over? How long will the restart process take to get things back to normal?" Are there any other surprises you've seen? Honestly, the most surprising thing is just the sheer volume of borrowers that have raised their hands to ask for a forbearance plan. Truly it's unprecedented. Even through the Great Recession, we didn't have this forbearance option, and normally these forbearance plans are used around a natural disaster. You go through for a short period of time and say, "Okay, we're going to give you some payment relief while we figure out what's going on." To see this happen on a global scale, particularly with the sheer number of borrowers, it's mind- boggling to think about what's going to happen with the work that servicers are going to have to do at the end of these, to convert these into some type of extension model. Are you forecasting any changes to foreclosure price appreciation trends? at's the big question that everybody wants to know, and I think it will determine how quickly the moratoriums end, the forbearance is resolved, and if we see a wave of defaults, like we would expect just given the sheer number of unemployment claims and the rise in delinquencies. You're certainly going to see pockets within the U.S. mortgage market around different product types. e bank-owned products and the GSE product are relatively stable, very high credit quality borrowers that were put into those programs with good equity positions. But in the FHA and private-label securities portfolios, you're already seeing rises and delinquencies and a big part of the reason why we have seen prices rise right now is because of the lack of supply. When the supply flips over and exceeds the demand, you could potentially see a decline in home prices. Do you see an education gap in municipalities when it comes to zombie properties? I do. ese nonprofits, these municipalities, they all look at it and say, "Look, foreclosures are bad. We shouldn't do that." Certainly in case of stay-at-home orders in this national practice, you don't want to be kicking people out of their houses. But having these properties sit there empty doesn't work for anybody. ere's this perception that local investors are just bad. What we've found is that the local investors are just better at getting the homes back into the housing stock than REO departments usually are. When you look at the before and after photos, what a property looked like when it's sold to an investor at the foreclosure sale and what it looks like when they resold it six months later, versus what a property looks like when reverted to the lender and then was sold as an REO. ey are night-and-day differences where you're like, these two are not even like properties anymore. Just to the level of investment and renovation that are done on the properties that are sold to a third party, but then go through, and they make it that property that somebody, a first-time homeowner, a homebuyer wants to purchase because it's turnkey ready. How do you make sure that everything is communicated to all the people that it needs to be? We work hard to stay in contact with the experts here. We're talking to the foreclosure attorneys in each state, we're talking to the servicers that are on the front lines, talking to borrowers. We're talking to the GSEs, we're talking to FHFA, we're talking to HUD, just trying to understand what they are seeing. What are they hearing? What are they thinking? What are they trying to address? en, we serve as this information conduit to where we can say, "Here's what we're hearing from everyone else." We try to fill that advisor role, because all of the issues around the moratoriums and the forbearance, we're not the ones having to actually administer them. We just happen to have a bird's eye view of what's going on and are able to help connect people that have heads down and all the information flying at them, so they can't really pick up their head and see the forest for the trees. "Certainly, in the case of stay-at-home orders, you don't want to be kicking people out of their houses. But, having these properties sit there empty doesn't work for anybody."

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