Credit service providers today operate between a rock and a tough place. Customers demand high quality service. Regulators require that products and services be provided fairly and equitably. OK, but the current business climate adds complexity with credit modifications, forbearance, and compliance confusion.
Regulators and lenders have not agreed on certain fair servicing models, valuation practices, or formally approved compliance tools. Data is challenging and is seldom captured accurately and completely in standard maintenance platforms. And while regulators and credit institutions in general have a common understanding of fair lending Pitfalls and what they could mean HMDA Compliance with fair servicing is still a moving goal.
The Coronavirus Aid, Relief and Economic Security (CARES) Act of 2020 introduced new requirements for loan deferral, with some guidelines later issued by various agencies. While the rules instruct servicers to offer a payment vacation without penalizing customers’ credit or loan rates, servicers must help customers through options and maintain the quality of service that customers expect.
They have to do all of this and at the same time comply with the rules, inform borrowers about options or change the loan. This increases the operational complexity of maintaining fair treatment in loan processing, where customer service must take into account the uniqueness of each loan and borrower, as well as the various people and systems involved in day-to-day processes and maintenance.
Consumer and fair service issues
When JD Power recently interviewed Customers who took out or refinanced mortgages with more than 30 of the country’s largest service providers reported long waiting times and little proactive communication. The survey was conducted from March to April 2020 at the height of the pandemic chaos in a time of historically low interest rates, record high unemployment and rising payment defaults.
Results analyzes onboarding, billing and payment, escrow management, fees, communications and digital, live and automated telephone interaction. It also examined customer satisfaction with risk / credit status, handling of transfers, tenure with servicer, and demographics. The survey results showed persistent challenges for many service providers with customer satisfaction, digital and call center experiences, which were then exacerbated by the COVID-19 pandemic.
In addition to customer experience challenges, consumer fears and frustrations from increased uncertainty about the expiration of unemployment benefits and general economic concerns can also fuel further Forbearance on residential mortgages Inquiries and omissions.
For example, Guidance for government-backed FHA and Veterans Affairs (VA) loans, it is clear that a lump sum payment may not be required after a deferral. However, there is still conflicting information about repayment options, confusion about how deferred payments can be made up after the deferral has expired, and a lack of understanding of borrowers’ rights, including the ability to receive deferral at all. Outstanding FHA and VA loans make up about 20% of the market.
The legislator questions whether the administration of deferral requests by mortgage service providers complies with the CARES Act. The newly appointed vice presidential candidate, Kamala Harris, is sure to have a vote. Notes from HousingWire Editor Kathleen Howley: “Eight years ago [Harris] came to be known as the toughest negotiator among the 49 attorneys general who stood up against the country’s largest banks to seek a $ 25 billion settlement for mortgage service violations.
Corresponding a special report of the Federal Housing Finance Agency (FHFA), Fannie Mae, Freddie Mac, and FHFA do not have adequate procedures in place to ensure that mortgage servicers comply with the CARES injunction.
Technology companies rise
New technologies can help with compliance, performance reporting, and analytics, and solve many of the challenges described above.
Asurity recently launched its RiskExec Fair Servicing Module. The tool is specifically configured to help lenders and service providers track practices and performance and manage complex loan deferrals and changes in accordance with CARES law.
The web-based RiskExec platform manages compliance reports and analyzes, automates the Home Mortgage Disclosure Act (HMDA), Community Reinvestment Act (CRA), redlining analyzes and processes for compliance with fair lending. In addition to overseeing borrower treatment, it also manages regulatory compliance obligations for lenders.
“It’s the best integrated fair lending compliance solution on the market,” said Dr. Anurag Agarwal, founder, president and chief architect of RiskExec. “Our customers have to react quickly to the evolving compliance landscape and our Fair Servicing Module helps to meet this need.”
What is a Lender to Do?
Nowadays it is difficult to say for sure whether the staff of a service company are completely fair and non-discriminatory. Discriminatory behaviors can occur unconsciously or occasionally, and it can be difficult to spot persistent patterns or isolated incidents in the midst of the high volume of activity. Forbearance and CARES compliance still feels like the Wild West. No models or tools have yet been fully accepted by the industry.
Millions of homeowners have already availed of Mortgage Forbearance and Amendment. Mortgage lenders and administrators today must employ targeted strategies for managing fair servicing risk – if they are not already. You need to balance the management of processes and regulatory changes in real time while ensuring fairness and compliance in day-to-day operations.