With the forbearance moratorium expiring in late July and the CFPB’s new foreclosure rule going into effect in August, servicers have a lot to consider when working with borrowers on forbearance exits and loss mitigation strategies. HousingWire recently spoke to Travis Britsch, General Manager of Hubzu, on post-forbearance strategies that benefit both service providers and borrowers.
HousingWire: So many Forbearance comes to an endWhat strategies can service providers use to support borrowers?
Travis Brite: Service providers should communicate with borrowers early on and ensure that this is done compliantly by checking the current and proposed regulations, CFPB or otherwise. Make them aware that they have the option to sell their home now during the forbearance if they wish to do so as a deferral exit option.
Early on, encourage borrowers to take advantage of loss mitigation options and take proactive steps to avoid foreclosure based on the best of information right now – there is not much time left and waiting too long can mean missing out on better options (i.e. they may not be able to change credit, sell quickly or whatever, and thus become foreclosed).
Servicers should also share the math of mortgage forbearance. Most homeowners will end the deferral after 12 or even 15 months with no payments. All missed payments and interest must be repaid. Even the sharp increases in property value may not be enough to cover the defaulted payments. This applies in particular to lower-income households with FHA loans that initially started with very little equity due to the low down payment requirement.
HW: How can servicers be one step ahead with above-average volumes?
TB: First, make sure they are fully staffed and / or internally increase efficiency. Second, make sure they work with great vendors (e.g., Hubzu for Signature Seller Assisted Sale (SSAS), standard short selling, foreclosure, and ultimately REO management and sales) who can perform well regardless of volume .
Finally, you should take advantage of all available communication / educational options as early as possible in loss mitigation and tell how high your payout amount would be on the last day of deferral protection.
Being on mortgage default won’t hurt a homeowner’s creditworthiness, but getting out of debt and defaulting on mortgages will seriously affect their creditworthiness and affect their ability to buy another home for many years to come.
HW: What are some of the biggest challenges for service staff as they move into 2021 and 2022?
TB: Some of the biggest challenges are pent-up standard inventory, which creates a multitude of potential bottlenecks in the standard service process. There are new regulations, CFPB or others, as well as personnel challenges that the service staff have to master. Many service providers have reduced down staff due to COVID-19-related work breaks, but will likely need to be hired again quickly and at the same time as many others in the industry.
Many providers that the service technicians used to rely on have now severely reduced staff and capacities or have completely merged their businesses. It is therefore advisable to ensure that all necessary providers (with appropriate staff, trained and efficient) are already on board and are ready for use after the moratoria and deferrals have expired.
HW: How is Hubzu prepared to help servicers with increased outages?
TB: Hubzu has been a leader in helping servicers deal with standard inventory since 2009 and has helped manage and sell over 225,000 residential properties with more than 2,500 short sales for servicers and their borrowers.
In 2020, Hubzu launched its Signature Seller Assisted Sales program, building on its short sale offering, which helps borrowers who have defaulted on payments – regardless of whether they are in an active deferral program or whether or not they have significant equity in their house . market and sell their home quickly to properly complete the standard process before foreclosure is required.
Hubzu works with service providers and these in turn involve borrowers early on in the deadline for defaults. The servicers and Hubzu work together to educate and guide the borrower on the best selling strategies to maximize the selling price with an accelerated marketing phase.
Often times, this partnership between the servicer, Hubzu, and the borrower can run in parallel with other loss mitigation strategies that the servicer would implement. Borrowers selling through Hubzu also have the option to sell with a lease back requirement that allows them to end the default but remain in the property for the duration of the lease with the new owner.
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