Improving Borrower Communication as Forbearance Ends

In-house mortgage loan servicing is an important revenue source for credit unions and an excellent way to provide the exceptional member service required to earn loyalty. Mortgage servicers must comply with changing regulatory requirements while meeting members’ needs. Mortgage servicing software and web applications help credit union servicers meet forbearance-related servicing requirements.

As credit unions move into 2022, they must develop new processes and programs to assist members impacted by the COVID-19 pandemic. Since the disease struck in early 2020, 9.3 million mortgages were in forbearance at some point, allowing homeowners to pause their mortgage payments for up to 18 months. Most people have exited forbearance, but 1.4 million homeowners were still in forbearance as of Sept. 26, 2021.

The deadline for extending or requesting new forbearance programs keeps changing. Initially, mortgage borrowers had until Sept. 30, 2021, to request an extension on their forbearance. On Sept. 27, the Federal Housing Administration announced that borrowers can request a new forbearance program – or extension of their existing forbearance – until the end of the COVID-19 National Emergency. The deadline to request initial forbearance for USDA and VA loans has also been extended.

Meanwhile, Congress has confirmed Rohit Chopra, an experienced consumer advocate, as the new director of the CFPB. Compliance experts have warned that the bureau appears to be poised to pursue an aggressive enforcement posture. Credit union servicers that fail to help their members avoid the higher risks of foreclosure could be considered non-compliant.

With a regulatory environment that emphasizes customer service for borrowers, credit unions need a solid communications and default servicing strategy to help members exiting forbearance avoid foreclosure.

The Critical Importance of Great Member Communication

Regulators have stressed the importance of communication as borrowers exit forbearance and get back on track with their mortgage payments. The CFPB recommended that servicers use multiple methods to communicate with consumers, such as:

• Developing and using self-service web-based tools and customer portals to assist homeowners in identifying available loan assistance options for their circumstances.
• Using technology that makes it easy for members to find the information they need without assistance from the servicer. Many of these tools are already built into leading mortgage servicing platforms.
• Providing tailored communication to members that includes videos and emails explaining options based on their loan type (e.g., FHA, VA, USDA, Fannie Mae or Freddie Mac).
• Providing information and educational resources in multiple languages to better assist consumers with limited English proficiency.
• Identifying borrowers’ contact preferences, allowing servicers to deliver information in a convenient, timely manner.

Government Resources for Mortgage Servicers

Assisting borrowers to get back on track post-forbearance and avoiding another foreclosure crisis are priorities for the federal government. To help servicers explain the complicated forbearance process to borrowers, government agencies have provided several resources.

The interagency housing portal is a master resource that explains how forbearance programs work and provides an overview of the options available to borrowers. The site offers many helpful tools for servicers and members, including information about forbearance repayment obligations.

The Mortgage Translations clearinghouse includes borrower education materials related to forbearance and avoiding foreclosure in several languages.

Mortgage servicers – not the CFPB – are responsible for helping borrowers navigate the post-forbearance process by providing information and answering their questions. The CFPB said it expects servicers to communicate more effectively and proactively as forbearance ends. Fortunately, leading-edge mortgage servicing software can help servicers meet this expectation.

Mortgage Servicing Software & Web Applications: The Key to Better Communication

Credit union servicers need the right mortgage servicing software and effective self-service web applications to quickly deliver information to borrowers. Servicers need mortgage servicing software that allows them to:

• Easily and automatically generate emails to specific borrowers, notifying them that a statement/notice is waiting for their review via a web application. Sharing information via web application allows servicers to track and confirm that borrowers received the information.
• Generate and push out personalized messages to specific borrowers that they can view through the web application portal. These personalized messages should appear in a pop-up window whenever the borrower logs into the web application. For example: “Your forbearance period will end on Jan. 15, 2022. Please contact us to discuss your repayment options.”
• Reach out to borrowers electronically in addition to contacting them by mail. Servicers must follow the specific borrower contact requirements of the various regulatory agencies regarding notification of borrowers whose loans are entering foreclosure. Servicing software should make this easy.
• Deliver real-time mortgage statements and other information to borrowers easily and automatically via web apps. By reducing routine phone calls from borrowers, servicers have more time to assist borrowers who are getting ready to exit forbearance and/or at risk for defaulting on their loan.

The right mortgage servicing software provides this functionality. Servicers should examine their software to be sure it has these essential communication-enhancing capabilities. By improving communication with borrowers, well-trained servicers using leading-edge mortgage servicing software can help borrowers resume their mortgage payments – and avoid foreclosure – as forbearance ends.

Anita Bush is Vice President of Mortgage Servicer Product Development for Financial Industry Computer Systems, Inc. (FICS), a mortgage software company based in Addison, Texas.