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73 progress in ramping up to handle the logistics of forbearance enrollment and communication. In some cases, this was done via hiring and training; in others, by shifting personnel from other activities and channels. e continuing refi boom, which appears to be followed by a delayed homebuying season, is creating resource challenges—though good ones—for some large lenders/servicers. Over the past few years, the declining volume of loans in default has meant fewer seasoned professionals and less capacity for servicers to draw upon. For large servicers and service providers, the labor shift associated with this spike in default processing could represent the hiring of hundreds of people. While finding qualified candidates to fill those positions could be challenging, the situation is made even more complex by social distancing and COVID- 19-related impacts to facilities management, interviewing, training, and order management coordination. CONFUSION CAN LEAD TO REPUTATIONAL RISK Although our industry is "living" the CARES Act, the average homeowner probably isn't. In a recent STRATMOR/MBA survey, 36% of respondents said they weren't even aware of the law or its protections. A NAR study found 71% of homeowners were worried they wouldn't qualify for mortgage relief. ese figures are important for two reasons: first, it suggests that as the months wear on and economic programs end, there could easily be an uptick in forbearance requests. Second, it should be a reminder to our industry that consumers really don't understand what's entailed in forbearances, loan modifications, and default processes. is most likely means they will be surprised—perhaps upset—when facing either a modification or default scenario. Mainstream media coverage of the CARES Act offers a preview of what the industry can expect over the next year. Although servicers were scrambling to understand the terms and, simultaneously, ramp up for demand, much of the coverage was critical—focusing on long hold times and suggesting that servicers were misinforming borrowers about their options. Imagine what borrower and media reaction will be when forbearance ends and significant numbers of borrowers won't be able to make their current payments, even with deferral. How will consumers react to learning they need to supply documentation to qualify for a modification and approval is not guaranteed? Finally, borrowers with private mortgages have been, in most instances, able to forbear. What if private investors take a harder line and begin default activities? Certainly, it will create negative press, if not prompt a governmental response. BEST PRACTICES Servicers must ensure policies and procedures continually adhere to the latest directives provided by regulatory agencies and that procedures are consistently followed through implementation of operational testing, monitoring, and controls. For example: • Reviewing website content, communications, and scripts frequently • Conducting third-party review of critical compliance considerations • Evaluating secret-shopper testing of enrollment and extension interactions • Using the check-in period with forbearance-takers to determine their needs, not just whether they want to extend or not • Using video as a standard job aid for employees and customer-friendly communication for borrowers • Standardizing procedures for consistent and compliant handling of nonresponsive customers • Working with community, minority, and religious organizations to extend outreach to distressed borrowers • Collaborating on forecasting with key suppliers to ensure supply-chain scaling and reliability • Ensuring clear and consistent communication regarding escrow timing and payment processes • Communicating with customers on their ability to pursue financing THE PATH FORWARD We began formulating our forbearance strategy by asking the question: How do you prepare for an event that's inevitably coming when you don't have real visibility into its magnitude? From our perspective, the answer: be proactive and empathetic evaluating major decisions using three guiding principles: • Compliance—All transactions are governed by compliance. While regulators have offered some latitude with COVID-19, it's critical that due diligence ensures operational processes are compliant with applicable guidelines. • Customers—Make the right thing happen for the consumer while being respectful and conscientious throughout the process. ere is an inherent distress in any default scenario, so customer service representatives' sensitivity throughout the process is paramount. • Servicer—If you are compliant and provide premier, caring customer service, then you're providing value to your clients. With expected volume volatility, standard service levels will not always apply. Dedication to compliance and customer service could prove much more critical than a more traditional operating metric. COVID-19 has driven unprecedented conditions across all aspects of our life. Critical people, processes, and technology will be required to support default processing going from historical lows to historical highs in a matter of months. However, actions of all of regulatory bodies, governing agencies and critical industry participants are also unprecedented and one of the most heartening things to come out of this tragic situation. Aligning this support with operational execution of the servicing and default management value streams will play a vital role in supporting the consumer and our overall economic recovery. Joe Chappell is the EVP of Covius Settlement Services, a part of Covius, a group of technology-enabled companies that provide compliance, quality assurance, and valuation solutions for the residential and commercial real estate market. In this role, Chappell is responsible for the strategic direction and leadership of the Settlement Services business unit including the growth of origination and default title processing and fulfillment and delivery of all products and services. Chappell is a mortgage industry veteran with more than 25 years' technical and operational experience and strong understanding of the industry.

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