On March 29, the Federal Housing Finance Agency (FHFA) announced Fannie Mae and Freddie Mac would enhance their COVID-19 pandemic-era deferral policies which allowed homeowners experiencing hardship to defer up to six months of mortgage payments to be settled at the end of the loan. Since the pandemic began, the FHFA has enabled lenders to complete more than 1 million payment deferrals, with roughly one-third of all homeowners exiting forbearance via payment deferrals since 2020.
Smart pandemic policies like this stabilized the housing market and, by extension, the economy when it was most needed, and today’s challenging market has emphasized the need for further policy reform as servicers expand their loss mitigation toolkits to keep homeowners in their homes.
Here’s how servicers can maintain real-time compliance to keep up with real-time policymaking, all while keeping homeowners where they belong — in their homes — and executing at scale with no mistakes in our highly regulated ecosystem.
Why further loss mitigation reform and expansion is still needed
COVID-19 pandemic hardships required quick-turn regulatory shifts which ultimately provided hardship relief to approximately 7.8 million homeowners with COVID-19 pandemic forbearance programs since March 2020. Government insurers and guarantors adapted to offer new options to borrowers like forbearance, partial claim/payment deferrals and extended-term modifications.
As the Mortgage Bankers Association (MBA) noted in its recent white paper, the current high-interest-rate environment poses additional challenges that require further policy reform and expansion so servicers have simple, sustainable and standardized loss mitigation options.
The traditional options for providing payment relief for homeowners — loan modifications that either extend the loan’s maturity date or reduce their interest rate to the market rate — are not as effective in the higher-interest-rate environment and do not provide the relief many homeowners need to maintain homeownership.
Further policies should focus on reducing administrative complexity and make scalability attainable so servicers can quickly provide relief to homeowners with consistent, accessible hardship relief regardless of hardship reason or who insures or guarantees the loan.
The CARES Act and other COVID-19 pandemic-era policy developments kept servicers engaged and informed, demanding quick adjustments to accommodate homeowners experiencing financial hardship, and recent market challenges have required similarly swift adoption from servicers. So, how can servicers stay ahead of the curve?
Real-time solutions for real-time policy changes
Sagent solves these problems with cloud core, agile infrastructure. So, what are the benefits of “cloud native” or “cloud-based” platforms? Put simply: speed, security, a better experience for homeowners and servicers, real-time processing and compliance across all activities — all at scale and always aligned with real-time regulatory changes.
Servicers and their fintech partners need to be innovating incrementally by bringing real-time solutions to real-time policymaking. For example, when the CARES Act went into effect to provide mortgage payment relief as the COVID-19 cases spiked in 2020, servicers powered by Sagent were ready with push-button forbearances on day one of the CARES relief effective date.
Sagent’s default platform provides full lifecycle functionality, enabling homeowners and servicers to work together to create sustainable options for homeowners when they’re facing financial hardship. A key component of this service is the servicer’s ability to establish the workflow that fits their processes.
The benefits of this innovative programming are broad reaching in addressing all aspects of loan servicing. Homeowners, first and foremost, are provided relief and resolution. Servicers achieve improved efficiency and greater effectiveness in managing compliance throughout the process. Sagent ensures delivery ahead of the curve, with no waiting and no elevated risk surrounding the next set of changes and challenges coming our way in the servicing industry.
Real-time data standards for compliance and customer retention
Our industry has improved materially since the experiences of the Great Recession, and we’ll continue to see servicers and regulators set a new bar for compliance. The focus on helping homeowners understand their options and make an informed choice remains.
Servicers must also focus on cost, customer retention and compliance. A strong, servicing fintech partner provides critical support in successful delivery of each of these areas.
Sagent is the industry’s only mortgage servicing platform with truly real-time data. Real-time data means systems can respond to real-time policymaking without ever missing consumer and investor requirements or any compliance details.
The new standard for excellence is being established, and Sagent is leading the way. Please reach out and let us know your thoughts on these predictions or your tech stack strategy.
Perry Hilzendeger is an executive vice president of servicing for Sagent.
