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68 While millions of Americans have filed unemployment claims, many did not have to because of the Paycheck Protection Program (PPP), which enabled businesses to keep workers on their payrolls. Meanwhile, the FHFA's forbearance plan to allow borrowers to skip payments and add them to the end of their loan terms has been a huge relief to homeowners who truly needed some financial breathing room. Luckily, we have been in an agency/government market since the last crisis so FHFA could respond impactfully. While the FHFA's decision brought stability and clarity to the unknown, however, it also means that an enormous number of loans will have to be modified when forbearance periods end. Since more than four million loans are currently in forbearance, we're expecting an enormous spike in loan modifications. Even half of this number would be huge. Most servicers don't have the means to underwrite many loan modifications. Nor are most servicers prepared for the wave of defaults that will likely follow from borrowers who will be unable to continue paying their mortgage because of permanent job loss. Yet another difference between the two crises involves human resources. When loan originations ground to a near halt during the 2008 recession, many mortgage company employees were able to switch from origination roles to servicing roles. Today, on the other hand, there are fewer people to keep up with the demand for both refis and loss mitigation assistance, especially with the pandemic forcing businesses to move to remote workforces. WHY UPGRADING YOUR TECHNOLOGY IS CRUCIAL As it stands, there are not enough bodies in the servicing industry to deal with the continuing demand for refis in addition to loan modification requests and other loss mitigation efforts. Making matters worse is the fact that there has been relatively little adoption and implementation of new technologies within individual servicing shops. at's because the thing servicers need most of all is technology capable of automating all the different processes that they'll need to ramp up in the weeks and months ahead. ey also need technology capable of identifying which borrowers in forbearance will be most likely to qualify for a loan modification and tools to assist in qualification requirements when at the loan level. And they need technology that enables borrowers to digitally sign their modified loan documents. Fortunately, it is possible for lenders and servicers to get all these tools today, and ideally in the same platform. For example, unlike during the past crisis, new tools are available that can apply predictive analytics to large amounts of data to determine which borrowers need help immediately and the type of help they need. Essentially, servicers can predict outcomes in ways they couldn't during the past crisis. By having the tools in place to handle those outcomes, they can streamline their operations, avoid losses, and get help to the borrowers who need it most. For example, predictive analytics can help servicers determine borrowers that are most likely to experience income and job loss based on the types of jobs they have. For loan modifications, they can also be used to make sure borrowers can afford their new payments. In addition, they can consider the myriad factors that impact these outcomes, such as debt-to-income and loan-to-value ratios and credit scores, to create the best outcomes for both the borrower and investor. And by predicting outcomes, they can also create plans on a loan-by-loan basis. Applying predictive analytics is basically about taking six million servicing records and running them through machine-learning tools to determine trends based on a borrower's profile, loan details, and other information. With the right technology and sufficient data, analytics can create decisions with an accuracy rate in the high-90% area. Predictive analytics had already been proven to be a useful servicing tool well before the pandemic. ere are vendors available with this technology, and the services to go along with it, such as SmartDocs, which allow lenders to capture data and store entire loan files digitally. For servicers that are strapped with resources, these technologies can help alleviate the current stress and prepare for the wave of loss mitigation requests and loan modifications. This time, the financial crisis isn't being driven by economic factors, nor through any fault of consumers. Feature By: Baker Breedlove