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25 IS COVID FALLOUT MAKING HOUSES SICK, TOO? By JK Huey e average person quickly became acquainted with a new term in 2020: Person- al Protective Equipment (PPE). Wearing a mask became a fashion statement of sorts and emerged as the go-to method to protect personal health against COVID-19. While we have gone to great lengths to keep ourselves healthy, many don't consider that the COVID-19 pandemic may also be impacting the value of homes and portfolio assets. e housing market has indeed emerged as a bright spot in the US economy. Buoyed by low in- terest rates and strong buyer demand, home prices increased at an unprecedented rate in 2020. Simultaneously, thanks to federal forbear- ance programs, the market has successfully staved off defaults despite historically high unemployment rates. But just because a loan is in forbearance doesn't mean servicers shouldn't be on top of managing assets. In short, what is the servicer's version of PPE? As part of the CARES Act, which was signed into law in late March of 2020, mortgage servicers are required to allow homeowners to put their loans into forbearance if they claim they're facing economic hardship. Since reaching a peak of over 8% last May, the forbearance rate has dropped to 5.20% as of March 2021, according the latest MBA Forbear- ance and Call Volume Survey. ere's no doubt that the level of federal government intervention to protect homeowners has prevented foreclosures. While there are significant differences from the last crisis, there remains a significant num- ber of households at risk of losing their homes, just as the U.S. economy is poised to emerge from the pandemic. Recent actions by the Federal Housing Finance Agency, the Federal Housing Adminis- tration, the Department of Veterans Affairs, and the U.S. Department of Agriculture prohibit servicers from foreclosing on most mortgages until June 30, 2021, and there is speculation in the industry that date may be further extended. At the end of the moratorium, families who cannot resume making regular payments will need to make other arrangements with their servicer to avoid foreclosure. For servicers, the primary objective is to serve their customer and keep them in their home, but they should also take steps during this time to protect their assets. at means efforts as simple as a drive-by inspection may be warranted. If a property is confirmed vacant, it's imperative they ensure the asset is being main- tained and is secured, while proceeding with foreclosure. If history has taught us a lesson, being proactive could save you millions. During the housing crisis of the 2008 Great Recession, many Americans were unable to make mortgage payments and lost their homes to foreclosure. Between 2007 and 2010, there were approximately 3.8 million foreclosures. We saw then that servicers weren't making the right demands on their vendors to inspect these properties, and the asset wasn't being cared for beyond simple inspections and basic main- tenance, like mowing the lawn. is level of maintenance doesn't address major issues that, if left unattended, could cost more to address. e takeaway is that servicers are ultimately held accountable for maintaining the property and shouldn't assume that the borrower is taking care of it. ey are also responsible for making sure they are working with effective property management vendors. Fast forward to today. e good news is that the number of so-called zombie foreclosures isn't at the level that neighborhoods grappled with during the great recession. According to ATTOM Data Solutions, abandoned or vacant foreclosed-upon homes so far in Q1 2021 repre- sented just one out of every 14,825. While the numbers may look good, servicers still need to be proactive with property mainte- nance. Some aren't doing inspections on prop- erties that are in forbearance or loss mitigation. Forbearance is typically a very small percentage of workout plans and generally is just for temporary relief. Under COVID-19, the borrower may be in forbearance for a year or more. Servicers need to pay attention when they lose touch with a borrower and determine if the property is vacant. Ignoring this could put the property at risk – ranging from blight, squatters, frozen/broken pipes – and servicers could be impacted with local ordinance fines, vandalism, and high repair costs. Hard-hit markets like Texas are grappling with the double blow of job losses and climate change which potentially challenge a borrower's ability to stay in a property. e state in Feb- ruary suffered a historical snow and ice storm that froze pipes and wreaked water damage to many homes. What happens if vacant homes are among the mix of properties that are impacted by burst pipes? Without proper management, that asset could suffer significant water damage, and a servicer could be held accountable for re- lated costs if they failed to manage the property. Beyond maintaining the asset, servicers should know the status and condition of the property to begin the proper steps to accelerate the disposition of those that are vacant. Remem- ber that under the CARES Act, a servicer of a federally backed mortgage may not: initiate any foreclosure process, move for a foreclosure judgment, order a sale, or execute a foreclo- sure-related eviction or foreclosure sale. ere is an exception for vacant or abandoned properties. ose empty homes could potentially be moved into foreclosure and provide much-needed affordable housing to prospective homebuyers. In the coming months, servicers should define their PPE as Property Preservation Ex- cellence, and take the following proactive steps: » Don't assume borrowers in forbearance occupy the property » Proactively inspect to confirm occupancy » Secure, maintain, and register (if required) vacant properties » Work with qualified partners to help manage properties JK Huey, CMB is a Corporate Ambassador for Brookstone Management, a leader in the mortgage field services industry for preserving and maintaining vacant, pre-foreclosure, and REO assets nationwide. Brookstone is committed to deliver the highest quality service to clients to preserve and protect their securable interests. Headquartered in New Jersey, Brookstone has offices throughout the country. SPONSORED CONTENT

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