Our last blog summarized the Federal Housing Administration’s (FHA’s) new Payment Supplement program and how meaningful the introduction of this loss mitigation alternative is for mortgage servicers. The loss mitigation framework is changing, whether it’s FHA’s PSA program, the Veterans Administration’s recently announced loss mitigation changes, or the Consumer Financial Protection Bureau’s proposed rule, ‘Streamlining Mortgage Servicing for Borrowers Experiencing Payment Difficulties, Regulation X’, the industry is repositioning. This is vitally important as the widened interest rate gap between current origination rates and servicing portfolio rates can be detrimental for distressed borrowers and the mortgage servicers trying to help them. Today’s interest rate market, Fed rate projections, and economic status may indicate a sunny outlook, but this doesn’t wash away an interest rate gap that is most often double a delinquent homeowner’s rate.
Where does this leave mortgage servicers?
As new programs begin to surface it is important that servicers pay close attention. Basic interest rate modifications will not suffice in this market and modifications are already anything but simple, requiring monitoring of application receipt, application completeness, eligibility, response timeframes, analysis of options, determination of applicable fees, and numerous waterfall criteria that are investor/agency specific. Newer programs are more creative in trying to recalibrate the status of the borrower in order to avoid foreclosure. Some programs migrate the loan back to the agency for servicing and/or portfolio ownership until certain terms are met. There are second liens, extended modifications, and more documentation requirements. As delinquencies rise, having additional foreclosure alternatives will almost certainly put an added strain on resources, system capabilities, and quality control efforts. Our goal at QC Verify is to help servicers navigate these changes, ensuring data is accurate and meaningful, with clear insight into areas of risk, and offering guidance on operational intervention and excellence.
Exception and error trends need attention Effective and rigorous quality control that caters to guidelines, as well as your proprietary approach to business, is a cornerstone of our business. As we work with our various clients to this end, we see a number of trends that can signal a great place for us to begin collaborating and focusing attention:
1. Connect with your borrowers early and on a consistent basis – The benefit of this effort abounds. It helps build trust and establish credibility; it minimizes errors; and most importantly, advances foreclosure avoidance before it gets started.
ü QC Verify can assist in monitoring early-stage delinquency contact initiatives in addition to regulatory and investor requirements for loss mitigation communication and documentation.
2. Track payment shock from increasing tax and insurance costs – This area is often overlooked until it is too late. However, with skyrocketing insurance costs, including hazard and flood, as well as substantial year-over-year increases in property taxes, the subsequent increases in mortgage payments can significantly increase delinquency while reducing loss mitigation options.
ü QC Verify can audit for increasing costs and the percentage of increase in payments, so you can analyze data against early-stage delinquencies and reach out earlier in the process to assist your at-risk borrowers.
3. Increase servicing diligence during workouts – As the cost-to-service only seems to go up, servicing resources become stretched, from reduced staffing to antiquated systems. In this moment, our industry is not only looking at increased loss mitigation volume but greater complexity, making it crucial that servicers remain diligent in all efforts to facilitate workout options.
ü QC Verify stays on top of changing regulation and waterfall requirements that impact workout options, eligibility, and implementation, allowing your staff to focus on responding to your delinquent borrower needs.
4. Know all of your loss mitigation options for borrowers – New and expanded programs are cropping up on a regular basis, which means staff education, operational processes, and system rules and workflow need to be updated and accurate. Ensuring your efforts in this area are timely and effective is a critical component of success from every point of view.
ü QC Verify can audit proactively to keep your staff aware of issues as they occur, as well as in follow-up, helping to ensure your distressed borrowers receive the best option based on eligibility and in a timely manner.
5. Make certain subservicer oversight and engagement is not overlooked – It can be natural to let oversight of activities of a subservicer decelerate in times of increasing regulation, requirements, and volume. This can be a costly omission so additional rigor and thoughtful attention to operational processes needs to be front and center.
ü QC Verify provides their full suite of servicing audit, due diligence, and QC support and automation so you can effectively manage your subservicer relationship(s) with greater soundness and reduced risk.
Leaning on Quality Control during times of change
Mortgage servicers often think of Quality Control as checklist processes that are necessary in order to meet investor requirements and pass state and agency audits. At QC Verify we know that Quality Control is far more than checklists. We view our client relationships as true partnerships, centered around your unique needs as a servicer. This is a key differentiator for QC Verify, understanding that servicers often feel they have no choice but to minimize data capabilities and/or choose their vendor partners based on price. We take our role seriously, providing relevant solutions to today’s industry obstacles through innovative approaches to audit, quality control, and due diligence.
When it seems like bankruptcy is the only option for homeowners struggling with delinquency, wouldn’t you want the freedom to connect with more borrowers, more effectively, and with better results? When you have a vendor partnership with QC Verify, you can explore complex and nuanced loss mitigation options with less risk and greater confidence because we help your loss mitigation team grasp the intent and implications of new programs. QC Verify innovates traditional QC practices, creating greater efficiency, improving communication, supporting timely completion of workouts, and insuring the accurate accumulation and use of data. We help you embrace program changes, not just tell you what’s changed.
Experience the distinction that a meaningful QC partnership can make as loss mitigation changes arise. Visit us at QCVerify.com to learn more about sophisticated technology with a human touch.
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