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82 SERVICERS ADAPT TO CHANGING TIMES COVID-19 presented mortgage servicers with a new challenge, creating and executing new customer solutions, while managing the impact of the pandemic on their own workforce. Mortgage servicers' ability to help customers impacted by life events and economic factors has consistently improved since 2009 when the U.S. Treasury first released the Home Affordable Modification Program (HAMP). Since that time, the mortgage servicing industry has built on the success of HAMP by enhancing programs to help struggling homeowners avoid foreclosure. Some of these enhancements included streamlined modifications and greater consistency across investors/ guarantors. Also, programs for assisting customers impacted by natural disasters (like Hurricanes Harvey and Irma) were further enhanced to provide immediate payment relief in a scalable way. LESSONS FROM THE COVID-19 CORONAVIRUS PANDEMIC As the world began to experience the effects of the COVID-19 pandemic, mortgage servicers faced a new challenge: simultaneously creating and executing new programs while managing the impacts COVID-19 had on their own operations and workforce. e country experienced a precipitous rise in unemployment, 3.5% in January 2020 to 14.7% April 2020 1 , resulting in the need to provide payment relief to approximately 3,800,000 2 customers within the initial two months of the COVID-19 pandemic (March and April of 2020). e forbearance program that ultimately offered relief up to 18 months and provided delinquency resolution by adding missed payments to the end of the loan term was an effective solution and illustrated several key loss mitigation design principles: » Consistency: Investor/insurer coordination is the key driver of success and confidence for both servicers and homeowners. Greater investor/insurer alignment of program offering helped deliver programs at scale with clear messaging to customers. » Efficiency, Simplicity, and Scalability: Simplicity of program design and reduced technical requirements, such as elimination of signed agreements and submission of proof of hardship, allowed relief to be delivered at scale. It also enabled servicers to rapidly offer assistance through multiple channels, including digital, voice recognition, and live agents. » Clarity: Customers in financial distress look for certainty that there will be a path to getting back on their feet. Providing a deferment option at the end of the forbearance period gave customers an exit path that avoided future hardship caused by a required lump sum payment. MAKING ENHANCEMENTS PERMANENT e following important enhancements were instrumental in the success of COVID-19 relief programs: » GSE rate reductions for customers whose loan-to-value (LTV ) was less than 80%. » Streamlined modifications for FHA customers. » FHA development of a 40-year modification program supported by Ginnie Mae liquidity. » FHA temporary waiver of outdated face- to-face meeting requirements. A NEW SET OF CHALLENGES ere are three options available to lower a customer's payments through modification: » Lowering a customer's interest rate Quick Take By: Erik Schmitt Considering the effectiveness of these solutions, the industry should evaluate adding them to the permanent loss mitigation toolkit for ongoing customer relief options.