Published On July 16, 2020With record forbearance requests, there is renewed emphasis on mortgage retention requirements for documentation. Record keeping will never be the same.
The financial fallout from COVID-19 never seems to stop spreading. Not only are unemployment claims on the rise, but more mortgage forbearances and modifications are expected than ever before, according to the Bureau of Labor Statistics. This means even greater challenges for servicers, who are dealing with record volumes and geographically scattered employees no longer working in a central office. Due to the current circumstances, mortgage retention requirements have never been more important.
According to a CNBC report, more than 4.7 million homeowners — 9% of all outstanding mortgages — were in private sector or government mortgage forbearance programs as of Memorial Day, with numbers only projected to rise heading into summer.
Relief for Homeowners
Forbearance programs enable borrowers to miss at least three months of payments, with some allowing borrowers to defer payments for up to a year by completing certain documentation. The deferred amounts eventually need to be repaid, with different servicers providing varied options, including:
- Extending the loan by the number of months the mortgage is deferred. For instance, a mortgage with a three-month forbearance would have three months added to the original term of the loan.
- Paying the deferred amount in a lump sum.
- Amortizing the deferred amount over the remaining life of the loan.
Detailed Documentation Required
Homeowners and servicers are expected to keep forbearance and repayment agreement documentation on record, according to Consumer Protection Financial Bureau rules. Servicers need to notify borrowers of any compliance or modification offers made or accepted, all subsequent communications and any temporary or final resolutions.
Beyond just keeping the documentation, servicers need to securely record and store it in such a way that they can find and produce it if the need arises. The information may need to be surfaced if any disputes occur, if the mortgage is refinanced, if the mortgagee obtains a subsequent mortgage or if regulators request the documentation for audits or other reasons.
Properly recording, securing, storing and recalling documentation is a challenge for mortgage servicers in the best of times. In addition to the COVID-19 forbearance requests and related documentation, servicers need to record, store and track documentation for non-coronavirus-related forbearances, delinquency notices and other borrower records.
Even in familiar working conditions, documents get misplaced or aren’t always kept secure. But now, servicers have the additional disadvantage of a record number of forbearance requests as well as a remote workforce. There is no possibility of sharing physical documents, and extra precautions must be taken to ensure any electronic document-sharing is done securely. An employee working away from the servicer’s office doesn’t have a filing system or the robust security precautions found in the typical mortgage lender’s office.
To properly manage, record, store, secure, recall and dispose of all these documents, servicers need to work with a partner that has a long and deep history of handling each of these mortgage retention requirements, and has the scalability to handle the surge in documentation volume.