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52 WHAT KIND OF SERVICE CAN YOU EXPECT? Quality mortgage servicing is critical as the housing market shifts. Feature By: Adel Issa is past spring, as the Federal Reserve began raising short-term interest rates, the housing market began to see the effects reflected in mortgage rates. In the week of May 12, according to Freddie Mac, the average interest rate on a 30-year fixed- rate mortgage was 5.3%, up 2.36% from the same week in 2021. Rates were also up 2.22% on 15-year fixed-rate mortgages, to 4.48%, while 5/1-year adjusted-rate mortgages had the lowest rate at 3.98% (up 1.39% from 2021). ese increases can mean hundreds of dollars more in mortgage payments each month, stretching consumers' abilities to get a needed refinance or to purchase a new home. Although the previous norm of interest rates hovering around 3% was historically quite low, the higher rates coincide with a housing market that is already struggling with record-low inventory and record-high home prices, as well as dealing with the lin- gering economic effects of the COVID-19 pandemic. In this environment, the role of the mortgage servicer is becoming increasingly important, as servicers and their customers are likely to be to- gether for longer as sales slow and refinances drop off. Mortgage servicing is central to many unique homeownership dynamics, and servicers need to have the tools, technology, and financial stability that will be necessary to handle their customers' needs in any economic environment. CRACK OPEN THE TOOLBOX ere are many reasons why a homeowner may be in forbearance with their mortgage servicer, but certainly, a significant number of consumers went into forbearance because of issues caused by the pandemic. e CARES Act allowed home- owners with a federally-backed loan to obtain up to 12 months of forbearance, and federal investors and insurers enabled servicers to offer longer periods of forbearance in certain circumstances. Many of these forbearances are now coming to an end, but some homeowners still are struggling and are just now asking for assistance, even though many pandemic-related programs are currently set to expire in 2023. With interest rates moving higher, refinancing into a lower-rate mortgage may not be a viable option to help these consumers, so servicers must be able to use a variety of tools made available by investors and insurers to work with such borrowers. Luckily for both servicers and the larger mar- ket, this doesn't seem to be a replay of the issues that the market saw in 2008. Today's borrowers had to go through a more rigorous loan qualifica- tion process, and, in addition, home values remain high, meaning there is very likely still equity in the property. However, although many loan modifica- tions in the past provided customers with a lower interest rate to help make the loan more afford- able, many homeowners might not see a benefit with a modification currently. Although a lower payment through modification may not be pos- sible, servicers can use different methods to bring customers current, including taking them back out to a 360-month or 480-month amortization on the modification. e tools available to the servicer will vary based on the type of loan, however. With govern- ment-backed loans, there is a prescribed regimen for servicers to follow, but some servicers may have a bit more flexibility in their options for non-gov- ernmental loans, depending on the value of the property and the investor backing the loans. One of the simplest and yet most valuable tools to find in a servicer is customer service. Can a borrower pick up the phone and talk with an actual person? Can they get their questions answered in a thorough manner and receive helpful information about their account? ere are a lot of options available to homeowners and servicers alike, from loan modifications to cash-out refinances, and the choices alone—let alone the financial difficulties— can often be overwhelming.