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How Mortgage Servicers Can Prepare to Avoid Foreclosures

April 13, 2021
Regulatory Compliance enforcement fines

Up until now, the Consumer Financial Protection Bureau (CFPB) has provided flexibility to financial services providers while they were adjusting to assisting consumers during the pandemic. But, “because many financial institutions have developed more robust remote capabilities and demonstrated improved operations, it is no longer prudent to maintain these flexibilities,” says Acting Director Dave Uejio. In effect as of April 1, 2021, the Bureau has rescinded seven policy statements and intends to exercise the full scope of their supervisory and enforcement under Dodd-Frank. 

One industry in particular affected by this is the mortgage industry. The CFPB has already warned mortgage servicers to take all necessary steps to prevent “a wave of avoidable foreclosures.” Unprepared is simply unacceptable.

As of January 2021, there are:

  • 2.7 million consumers are still in forbearance programs
  • 2.1 million consumers in forbearance and at least 90 days delinquent on mortgage payments

Industry data suggests that over 1.7 million consumers will exit their forbearance programs come Fall 2021, leaving them over a year behind on mortgage payments.

What does this mean for mortgage servicers? 

In order to prevent a huge spike in foreclosures, the Bureau expects mortgage servicers to up their communication with homeowners who will likely need further assistance. In fact, the Bureau “urges servicers to dedicate sufficient resources and staff to ensure they can communicate clearly with borrowers, effectively manage borrower requests for assistance, and promote loss mitigation.”

Of course, not all borrowers will be able to resume making payments on time. Regardless, “the Bureau will hold mortgage servicers accountable for complying with Regulation X with the aim of ensuring that homeowners have the opportunity to be evaluated for loss mitigation prior to the initiation of foreclosure.”

What the Bureau will be looking for

According to the bulletin, the CFPB will pay particular attention to how servicers are:

  • Providing clear and readily understandable information to borrowers about their options for payment assistance
  • Complying with the outreach requirements in Regulation X to ensure that borrowers are getting needed information about loss mitigation options, including:
    • For borrowers who request further assistance, whether servicers are promptly resuming reasonable diligence in obtaining documents and information to complete loss mitigation applications
    • For borrowers in forbearance, whether servicers are contacting borrowers before the end of the forbearance period to determine if the borrower wishes to complete the loss mitigation application and proceed with a full loss mitigation application
    • Whether servicers are complying with the Equal Credit Opportunity Act’s (ECOA’s) prohibition against discriminating against any applicant, with respect to any aspect of a credit transaction
  • Promptly handling loss mitigation inquiries and avoid unreasonably long hold times on phone lines
  • Maintaining policies and procedures that are reasonably designed to achieve the continuity of contact objectives to ensure that delinquent borrowers receive accurate information about their loss mitigation options
  • Evaluating the loss mitigation applications consistent with the Regulation X requirements to promote timely and consistent evaluations
  • Complying with foreclosure restrictions in Regulation X and other Federal or State foreclosure restriction
  • Complying with the Fair Credit Reporting Act’s requirements to report the credit obligation or account appropriately.

Automate the loss mitigation process

PerformLine’s loss mitigation rulebooks help mortgage servicers in meeting Regulation X requirements for verbal requests for loss mitigation applications in their call centers.

Through automated call center monitoring, PerformLine is able to aid mortgage servicers to track and flag calls that can be considered the start of “verbal loss mitigation.” By leveraging natural language processing (NLP) and artificial intelligence, the PerformLine platform automatically reviews every minute of every call to discover signals of forbearance requests related to hardships caused by the COVID-19 pandemic. Those borrowers can then be classified as oral requests and therefore trigger the obligations that stem from receipt of an application (including sending an acknowledgment letter and exercising reasonable diligence to assist the borrower in completing the loss mitigation application) can be sent to the appropriate departments for assistance.

Having this automation in place to identify loss mitigation applications in call centers can help ensure timely evaluations and assistance to meet the CFPB’s expectations and avoid enforcements or penalties. 

To learn more about how PerformLine is helping mortgage servicers meet their loss mitigation requirements, speak to one of our experts today.

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