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65 downwards, with three successive weeks of declines in forbearance volume (see Figure 1). However, these declines are all single basis point drops, so unfortunately, forbearance numbers are mostly consistent, still sitting at 2.7 million total borrowers in forbearance. While total forbearances may be declining slightly, it is worth noting that 81.6% of borrowers in forbearance have extended their forbearances (see Figure 2), while forbearance exits have slowed to a crawl. e good news (for servicers and borrowers) is this: we're not hurtling towards a foreclosure crisis a la 2008. According to the Urban Institute, borrowers this time around have a much stronger home equity buffer against foreclosure thanks to home price appreciation. Borrowers with government-secured mortgages have an average 22% equity buffer (with only 3.6% of borrowers having negative equity). Traditionally, 20% equity is the turning point where borrowers are considered to have a strong enough financial incentive not to abandon mortgage repayment efforts. But as forbearance volume remains steady, servicers need to shore up their loss mitigation waterfall to prepare for the wave when tides turn and forbearances finally expire for good. Servicers need to be asking themselves, "How can I make sure our servicing system is up to date with the latest policy updates? How can we make sure we're compliant with new policies, and how do we communicate those policy shifts to our customers? How can we ensure our loss mitigation waterfall is accurate?" For many borrowers, the latest forbearance and foreclosure extensions from the Biden administration have extended their runway into loss mitigation. However, policy relief can only last so long, and servicers need to be arming themselves with powerful default management technology now to scale their loss mitigation capabilities before things start to escalate. SERVICER TAKEAWAYS If 2020 was characterized by a series of unfortunate events, may 2021 be characterized by our painstakingly slow, steady recovery from those events. While things are getting better and agencies are stepping in to help, servicers still face a slew of challenges. Here are three key takeaways for servicers as we head into Q2: 1. Brace for a New Wave of Borrower Requests e forbearance and foreclosure extensions we saw in mid-February mean that servicers have to prepare for another wave of borrowers reaching out because they need fast forbearance extensions. By now, this should be old hat, as servicers have been scaling their support teams throughout COVID-19 to handle upticks in borrower queries. 2. Renewed Efforts for Borrower Educations and Outreach We keep hearing about this ongoing problem of borrowers whose forbearances are close to expiring (or have already expired) who do not know that they have to explicitly request extensions from their servicers. is has resulted in hundreds of thousands of borrowers who are needlessly delinquent who are ignoring outreach from their servicers. is will continue to be an issue, as there will be borrowers out there who don't understand that they must reach out to request these two new periods of three-month forbearance extensions on top of the initial 12 months offered through the CARES Act. Proactive borrower outreach and education campaigns will be necessary to help borrowers who are flirting with delinquency understand that they can access additional hardship support. It's on servicers to ensure they are adequately conveying policy updates to homeowners with expedience, distilling down the complex policies, and shifting deadlines into simplified, easily digestible updates for homeowners. 3. Ensure Your Tech Stack Can Handle It All Servicers are faced with a Herculean task: provide real-time hardship care while complying with complex rule changes. Fannie Mae's recent Mortgage Lender Sentiment Survey found that 45% of servicers say keeping up with policy changes from investors was their biggest or second biggest COVID-19 challenge. Good servicing technology can (and should) reduce that friction. In a tumultuous servicing climate, it will be the servicers with powerful servicing technology who will emerge from COVID-19 with stable, happy borrowers and a competitive edge in the market. e seamless interplay between loan servicing, default management, and customer care platforms exemplifies how servicers can adapt to each CARES rollout with modern borrower self-service and real-time configuration (rather than coding) to comply with real-time policy changes. Matt Tully is the SVP of Agency Affairs and Chief Compliance Officer at Sagent, a company that helps servicers engage borrowers, earn customer loyalty, lower servicing costs, ensure compliance and increase the value of servicing rights throughout full market cycles. To reach Tully with questions or to subscribe to his monthly Compliance Compass newsletter, email matthew.tully@sagent.com. FIGURE 2

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