Vaultedge newsletter - Foreclosure moratorium ended. What now?

August 09, 2021

Dear Friends, Colleagues & Customers:

  • In the previous weeks, we wrote about the foreclosure moratorium imposed by the federal government coming to an end. Well, the moratorium officially ended on 31st July. So what next?

  • An estimated 1.75 million homeowners — roughly 3.5% of all homes — are in some sort of forbearance plan with their bank. By comparison, about 10 million homeowners lost their homes to foreclosure after the housing bubble burst in 2008. So the situation is not really bad.

  • It doesn't mean that 1.75 million homeowners are at risk of losing their homes immediately. Both by federal requirements as well as in their self interest, banks will first try to restructure the loans before starting foreclosure proceedings. Given that, there would be more forced sales than foreclosures and the borrowers can walk away with their credit score intact. Plus, there still are some protections available for the borrowers.

  • However, there is one difference that the borrowers need to be aware immediately. With the federal moratorium ending, the onus of initiating the required steps to avoid foreclosure shifts back to the borrower. There are several options that borrowers still have: They can extend the forbearance if they haven't used up the full 18 month period, they can go for a deferral or a loan modification.

  • If you are a Servicer, then in most cases it would actually make sense for you to work with the borrower to restructure the loan. You can tack the overdue payments to the end of the loan term, you can offer a lower interest rate and hence a lower monthly payment. The cost of these would almost always be less than the cost of foreclosure proceedings. So it is actually a win-win to the servicer and the borrower.

  • Along with the foreclosure moratorium, the Eviction ban which prevented landlords from evicting renters with overdue payments also ended on 31st July. But the government reversed course and issued a 60-day extension that will apply to counties with elevated Covid-19 infection rates due to the spread of the Delta variant. Good for the renters, but what about the landlords (some of who are probably behind their mortgage payments)?

  • Not surprisingly, National Apartment Association, a landlord group sued US government for rent lost under eviction moratorium. I am rooting for them.

  • JD Power published their annual customer satisfaction survey results for 2021. Guess who topped the list? The key findings: a) Bank-affiliated servicers are lagging behind non-bank services. b) The overall satisfaction increased this year, but that is largely driven by Forbearance and so isn't expected to last much longer.

  • MBA published Mortgage Loan Compensation report for Q2, 2021. While the average commission paid to loan officers per loan originated decreased only slightly from 103 basis points to 101 basis points, the quarterly bonus compensation paid to loan processors dropped from $2,684 per processor per month in Q2 2020 to $1,999 in Q2 2021. This is not surprising because Loan processor staffing grew by 49 percent from Q2 2020 to Q2 2021. If you are a lender, this could be the biggest area for you to look at to adjust to the new reality of 2021 & 2022.

  • We interviewed some more fantastic guests for our podcast in the last few weeks. For my friends dealing in secondary/ whole loan trading, don't miss this episode with Shawn Ansley, Managing Director, Vice Capital. He talks about how secondary markets are expected to perform in the current market conditions.

  • If you ever spoke to Lisa Springer, CEO of Stratmor Group you will not forget her. She has a very varied experience and she makes a very compelling case for every point she makes. Listen to Lisa's take on what really matters to lenders and servicers when it comes to technology.

  • Margin compression is a theme that keeps coming in our discussions with top mortgage industry executives. We spoke to Jamie Cavanaugh, COO of Amerifund Home Loans. She is someone who saw the 2007-08 and came stronger. Jamie shared her insights on how mortgage lenders can better prepare themselves to face market uncertainties and margin compression. If margin compression is on your mind, then you can't afford to miss this.

  • Just this morning, I came across this news that put a big smile on my face. Rushmore Loan Management services is expanding operations with a move to a much larger office in Dallas. It is great news for me for two reasons: 1. This hopefully signals a return to working from offices (I miss the office coffee and banter) and 2. They are moving to Irving, Dallas, kind of next door to where we operate from. Welcome neighbour! :)

Since early 2020, banks across the U.S. have been banned from foreclosing on homes as part of the federal government’s efforts to assist families feeling economic pain caused by the pandemic

The federal government's pause on pandemic-related foreclosure has prevented a mortgage crisis — so far. But as forbearances are ending, homeowners need to act to avoid losing their homes.

The National Apartment Association says the CDC's eviction ban cost its members tens of billions of dollars.

Mortgage servicers faced a real challenge when looking to help homeowners who were facing hardships during the pandemic and it looks like many succeeded.

LBA Ware, Macon, Ga., said mortgage industry loan compensation per loan originator declined in the second quarter despite a marginal increase in loan volume from Q2 2020 to Q2 2021.

Shawn shares his perspectives on how secondary markets are expected to perform in the current market conditions.

Lisa has over 3 decades of experience in mortgage technology space. She speaks about the four areas where companies should focus on, in accelerating tech adoption in the industry.

‎Jamie talks about her early years in the mortgage industry & how she overturned professional odds during the 2007-08 meltdown to come back stronger & resilient. She presents a detailed toolkit for lenders to deal with margin compression - this includes a strong focus on CX, operational efficiency, proactive business development & other measures.

A mortgage company is expanding its Dallas-area operations with a large new office in Irving. California-based Rushmore Loan Management Services is leasing...