In this current volatile economic environment caused by a public health crisis, mortgage borrowers may have difficulty making mortgage payments. The OCC has directed banks to be flexible with such borrowers. The GSEs have encouraged forbearance and halted foreclosure activity. Like in the most recent financial crisis, mortgage servicers’ handling of loss mitigation requests will be tested in terms of resources to handle calls, processing time delays, investor response time, etc. Overlay these constraints with compliance as it relates to fair lending laws and regulations, and servicers could find themselves on the wrong side of the law. Non-compliance with fair servicing guidelines could lead to legal, financial, operational, or reputational damage.
I’d like to offer some practical advice to help prevent today’s mitigation activities from becoming tomorrow’s fair servicing issues. Be mindful of the following:
- Underwriting – a request for forbearance should be approached somewhat like an application that will result in an approval or denial potentially examined by prohibited bases;
- Majority Minority Tract Analysis – the geographic patterns of your loss mitigation decisions should not favor the census tract demographics of one group versus another;
- Pricing – modification terms, deficiency waivers, fee waivers should be applied equally;
- Steering – the best workout option should be offered based on the borrower’s qualifications;
- Quality of Assistance – keep your assistance to those requesting help consistent, resisting the temptation to view some borrowers more deserving of help than others. Avoid incomplete application and processing time disparities if possible;
- Continuity of Contact – avoid giving borrowers the runaround which can end up looking like disparate treatment; and
- Procedural Notice Timeframes – review and send all notices within CFPB guidelines.
If you are concerned about your fair servicing risk exposure, let us help. We can quickly transform your data into powerful fair servicing analytics with our Fair Servicing Magic™ cloud-based software designed to monitor your loss mitigation activities for fair servicing violations. Be ahead of the curve–not behind it.