DS News

68 Feature By: Courtney Thompson Believe it or not, it is 2021. Cars are driving themselves, cash is (bit) coin, and SpaceX has beat out Blue Origin to bring us back to the moon. Humans have been shut in their homes for the better part of the last 18 months—and yet still, default mortgage servicing is a paper-based process. Times have changed, but when will the industry do the work (where feasible) to digitize in order to: » make internal processing more efficient » create capacity to ride the COVID-19 resolution and foreclosure wave » meet the consumer (and our foreclosure staff ) where they are in this otherwise largely electronic world? THE STATE OF THE SERVICING INDUSTRY e COVID-19 pandemic has ignited almost-never-before-seen mortgage delinquency across the United States. As of February 16, 2021, more than 10 million homeowners were delinquent on their mortgage payments, with at least 2.7 million homeowners participating in the forbearance relief offered to federally-backed mortgage portfolios. 1 LOSS MITIGATION Even with each investor and insurer's extensions to the consumer forbearance protections, if these consumers (and assets) are to avoid foreclosure, the vast majority of COVID-19-impacted assets will need a loss mitigation solution (including loan modifications) in the next year. Servicer call centers and loss mitigation departments across the country have been inundated since March of 2020, while attempting to scale for what was supposed to be a big loss-mitigation bang in the second quarter of 2021—this bang is now more of a slow painful burn into next year. It really hasn't stopped. FORECLOSURE On June 24, the Consumer Financial Protection Bureau (CFPB) issued its highly anticipated amendments to the federal mortgage servicing rules addressing additional protections afforded to consumers between its effective date of August 31, 2021, and the end of the year in an effort to prevent unnecessary foreclosure for the "at least 900,000 homeowners projected to exit forbearance between now and the end of the year." 2 With foreclosure moratoria lifting, servicer foreclosure departments and the foreclosure legal network must scale to meet the volume of assets that will eventually move through these processes, even though foreclosure has been at an outright standstill since March 18, 2020. Practically speaking, and without leveraging any technology or other efficiency to make the process easier, this means that servicers will need anywhere from five to 10 times the number of agents managing assets in these departments to keep up. Worse, while staffing models may yield a lower number, inexperienced agents cause a different risk to preparedness from a pure capacity perspective—namely an increased risk of costly (whether borrower or servicer harm) compliance errors. WIDESPREAD USE OF PAPER IN LOSS MITIGATION AND FORECLOSURE e practical reality of even the most efficient servicing process puts the onus of properly completing the signature requirements associated with loss mitigation closing packages (including notarization) on the consumer—the consumer is sent via postal carrier (or equivalent) a comprehensive closing package, with instructions to seek out a notary, and is guided by sticky tabs where to "Sign Here." ese consumers are typically unfamiliar with the requirements and complexities of real estate transactions, are ashamed of their inability to make their mortgage payments, and struggle to timely and/or accurately return the documents in a recordable format. 68 THE PAPER PROBLEM Remote Online Notarization adoption is key to streamlining many key default servicing processes. 1 See Fact Sheet: Biden Administration Announces Extension of COVID-19 Forbearance and Foreclosure Protections. 2 See https://www.consumerfinance.gov/about-us/newsroom/cfpb-issues-rules-to-facilitate-smooth-transition-as-federal-foreclosure-protections-expire/ 3 https://www.uscourts.gov/news/2013/12/09/25-years-later-pacer-electronic-filing-continue-change-courts 4 https://en.wikipedia.org/wiki/Bundle_of_rights

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