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By Matthew Preuss Published June 6, 2023
Mortgage borrowers have been largely insulated from their servicers for the past few years as the country struggled to deal with COVID and the government worked to keep the economy from deteriorating. Servicers also did their part by working with borrowers through forbearance to keep them on track and out of default.
It seems to have worked and now forbearance programs and moratoria on default servicing activities are ending.
Unfortunately, many borrowers have been “trained” by this crisis not to worry about their repayment obligations. That could be a problem for them and their servicers if delinquencies rise, which is exactly what journalists have been reporting over the past week or so.
Servicers hunt for foreclosure prevention tools
The first of these articles came out on June 22, 2023 and was written by National Mortgage News capital markets editor Bonnie Sinnock.
“Forbearance has reached the point where less than half of a percent of borrowers have it,” Sinnock reported. “That means servicers will be increasingly reliant on other types of foreclosure prevention.”
The Mortgage Bankers Association reported that about 18% of borrowers departed forbearance without loss mitigation but kept paying, while another 18% exited without loss mitigation but are delinquent due to processing delays or “ghosting.”
We are very familiar with that term. Borrowers who get behind on payments will often quit accepting phone calls from their creditor or mortgage servicer. Texts and emails will also go unanswered. If the borrower doesn’t get in contact with their creditor, their problems only get worse. In the case of a mortgage, they could lose their home.
Servicers need other ways to get borrower attention if delinquencies rise. And that takes us to the second article that hit last week.
Foreclosure filings rise 7%
On June 23, MBA Newslink editor Michael Tucker wrote an article reporting on the new ATTOM numbers, showing over 35,000 properties had gone into default or foreclosure in May.
In addition, lenders took back 4,020 U.S. properties as REO in May, which ATTOM said was up 38 percent from last month and up 41 percent from last year.
We’ve been talking to mortgage servicers for some time and warning them that this was coming. Fortunately, we have the services and national network to help them through this crisis.
The first step is to open that line of communication with the homeowner so the servicer can lay out their options. For servicers that don’t have access to a national network of people to knock on doors, this will be a problem.
And that’s really all it takes, having someone in the borrower’s community who can walk up to their house and knock on the door and introduce themselves to the borrower as a representative of their mortgage servicer.
When this happens and the borrower realizes that the servicer is not out to punish them for getting behind, but rather is truly interested in helping them save their home, the chances of them returning their loan to current status dramatically improve.
To find out more about how NCCI can help you mitigate the risk of rising delinquencies in your mortgage servicing portfolio, reach out to us today
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