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31 Journal SPONSORED CONTENT SERVICERS FACE LINGERING CHALLENGES AS A RESULT OF COVID-19 While some housing industry sectors have begun adjusting to the new normal brought on by COVID-19, servicers continue to struggle with lingering challenges related to the CARES Act and forbearance processing. Under the CARES Act, homeowners can ask for forbearance from their mortgage servicers and suspend payments for up to 12 months. ough numbers have declined since peaking earlier this year, the Mortgage Bankers Association estimates there are still at least 3.4 million homeowners in forbearance plans. According to the MBA's latest Forbearance and Call Volume Survey, when broken out by stage, 21.68% of total loans in forbearance are in the initial forbearance plan stage and over 76% are in a forbearance extension, with 1.86% as forbearance re-entries. With the large number of borrowers seeking forbearance through the CARES Act, servicers may be experiencing staffing challenges as they aim to provide guidance and support. Before COVID-19, servicers were staffed to handle a historically low number of delinquencies and defaults. e CARES Act expanded servicers' forbearance pipeline with little warning, and their customer support staff may be feeling the strain. As servicers increase headcount to accommodate the numbers of borrowers needing assistance, they must still effectively train new staff in a virtual, work-from-home environment—yet another strain on resources. With the added pressure of forbearance requests, servicers must also remain in compliance with regulations at all levels. e government response to COVID-19 has complicated this as guidelines and requirements often change quickly. For example, in September, the Department of Veterans Affairs issued Circular 26-20-33, providing a temporary waiver to existing regulations that would prohibiting payment deferment as a loss mitigation option. is temporary waiver permits servicers to offer payment deferral as a COVID-19 loss mitigation option to borrowers who requested a CARES Act forbearance. While no mandatory effective date was provided, it's interpreted that the deferment option can be offered immediately. Changes without lead time to update systems and processes place additional strain on servicers' resources. To further complicate matters, requirements are not always aligned on a federal, state, and local level. is means servicers must navigate and comply with various guidelines. is requires coordinated efforts to track legal and regulatory changes, which often involve multiple business and functional areas. Depending on organizational and product complexity, automated solutions are necessary to track changes, distribute information to stakeholders, and follow up to validate changes were successfully and compliantly implemented. Given the complexity of servicing, the extensive and complex legal and regulatory requirements that must be proactively managed, and the external stressors placed upon servicers by COVID-19, it's both more important and more difficult than ever for servicers to ensure their processes remain in compliance not only with investor and insurer guidelines but with the CARES Act and ever-evolving state guidelines. One measure servicers can take to ensure their operations stand up to examiner scrutiny is to undergo a compliance review. Wolters Kluwer offers consulting services that include a CARES Act Compliance Examination Review based on the Federal Reserve Board and the Conference of State Bank Supervisors' recently published examination procedures. Wolters Kluwer Advisory Consultants can help financial institutions prepare for the CARES Act exam through an assessment of: » Compliance with the credit reporting and mortgage servicing provisions of the CARES Act » Quality of compliance management systems » Internal controls, policies, and procedures' reliance for monitoring CARES Act compliance » Processes for effecting corrective action when violations of law are identified or where compliance management system deficiencies are noted With the servicing challenges under the CARES Act, it's more critical than ever to maintain a framework that ensures compliance responsibilities are thoroughly met. By undergoing a thorough CARES Act compliance pre-examination review, servicers can identify and address potential weak spots and hazards before they become a larger problem. To learn more, please visit WoltersKluwer.com.