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Forbearance, Foreclosure, Eviction: Where We're At & Where We're Going

Mortgage industry compliance

The last several months have been an emotional roller coaster filled with so many ups and downs. For so many families that are behind in rent or still in forbearance, there have been more downs than ups, especially in the past week of news reporting…

Last Thursday, the United States Supreme Court handed down a 6-3 decision rejecting any further extensions of the moratorium on evictions due to the ongoing pandemic. The decision handed down by the conservative justices on the high court stated that the Centers of Disease Control (CDC)'s extension of the moratorium through October in areas with high COVID-19 infection rates was illegal and an overreach of the CDC's power. This decision is definitely a win for landlords, however for every win, there is a loss…

The U.S. Census Bureau estimated that over eight million households are behind on their rent, with approximately 1.2 million of those households reporting that it is "very likely" that they will be forced out of their homes within the next two months due to eviction. As I reported in the last issue of The Bottom Line, $47 billion in federal Emergency Rental Assistance program funds was designated to provide relief to these families and, at last check, only $5 billion has been disbursed (just $2 billion additional funds in the last month). When you do the math, you can't help but to hurt for these families and the landlords who have not received payments during the pandemic. 

The Mortgage Bankers Association estimated that there are 1.6 million homeowners that are currently in forbearance plans. As of this last week, those numbers have gone unchanged. 

"We expect a sharp increase in forbearance exits over the next month as many borrowers reach the 18-month mark and see their forbearance plans end. For those borrowers who have exited in August, the majority either enter deferral plans or obtain modifications." – Mike Fratantoni, MBA Senior Vice President and Chief Economist

This is ideal for those able to work with their servicers to get a deferral plan, or modification, as it allows those borrowers to stay in their homes. 

Unfortunately, there's still a portion of the population that has not recovered and are growing concerned that they may not be able to keep their homes. The same Census report that I referenced around renter sentiment also collected data from those nearing the end of their forbearance plans, specifically seeking their thoughts on the likelihood of having to leave their home due to foreclosure over the next two months. Results show that just over 1 million stated that they felt "very likely" to "somewhat likely" that they would have to plan to leave their homes within the next two months.

The Consumer Financial Protection Bureau (CFPB) has continued to impress upon servicers the importance of being prepared to provide every opportunity that they possibly can to help homeowners avoid foreclosure. On August 31st, the CFPB 2021 Mortgage Servicing COVID-19 Proposed Rule went into effect which will help those exiting forbearance to stay in their homes. 

The idea behind this rule is to: 

  1. Ensure homeowners understand their options,
  2. Allow servicers to provide streamlined modifications without having to have all of the documentation, and
  3. Ensure homeowners have access to housing counselors that are able to ensure that they understand all of their options.

The Bottom Line

The bottom line is, do the math and it's increasingly clear that there is so much work to be done and very little time to do it… When this is done, minorities and women with children will be hit hardest and for many, bouncing back may be difficult. There has long been a desire to close the wealth gap for minorities, and I have shared with you my thoughts, including how having parents achieving homeownership was a big deal that stuck with me and accelerated my journey once I had children of my own… but unless more happens, for some, it will continue to just be a discussion. Where do we go from here? Who will be there to help these families should they find themselves without a place to call home? For those that have been impacted and are still being impacted, I pray for a miracle, and that better days come to them and their families. 

If you are working with homeowners, renters, or landlords-or just have a friend or family member that is in need of assistance-the CFPB's website is filled with multiple resources. 

If you know of a family that feels they have been the victim of housing discrimination, they can file a complaint with HUD’s Office of Fair Housing Equal Opportunity

Mortgage Servicers-all eyes are on you.  As your clients are exiting their forbearance plans, don't get caught in the crosshairs of compliance issues that could easily be avoided. PerformLine's ready-to-use rulebooks are an essential part of our omni-channel platform that helps make compliance easy. Specific to fair lending and racial equity, our Bias & Discrimination and Fair Lending Act (FLA) rulebooks will quickly flag any compliance issues for review by monitoring content against these rules. And, don’t forget to track consumer complaints-they’re important! Make sure that you're following the trends and preparing your business to avoid regulatory scrutiny. Check out our breakdown of the latest trends from the CFPB's complaint database in this infographic, and be sure to keep an eye out in early Q4 of this year for when we release our annual Complaint Risk Signal Report (take a look at last year's report here).

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Rhonda McGill Senior Director of Client Success
Rhonda is the Senior Director of Client Success at PerformLine.

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