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Managing Rising Forbearance Requests in Wake of CARES Act

By April 25, 2020 April 29th, 2020
Managing Rising Forbearance Requests in Wake of CARES Act

The effect of the COVID-19 pandemic is being felt far beyond the number of people who are infected. In the US, more than 22 million Americans have filed for unemployment aid since President Trump declared a national emergency. There has been a staggering loss of jobs that has wiped out a decade of employment gains and pushed families into crisis. Several homeowners whose finances have been battered by the coronavirus are unable to meet their mortgage payment schedules.

President Trump consequently signed the Coronavirus Aid, Relief, and Economic Security (CARES) Act to provide substantial relief in the form of up to a year of forbearance — the postponement or reduction of the loan payment – to homeowners with mortgages backed by federal loans. CARES Act allows affected borrowers with federally backed mortgages to request a payment reprieve of up to 12 months.

Rise in forbearance requests

Data released by the Mortgage Bankers Association (MBA) have shown that the total number of mortgages in forbearance rose to 3.74% in the week of March 30 to April 5, up from only 0.25% of all loans that were in forbearance for the week ending March 2. In a statement, Mike Fratantoni, MBA’s senior vice president and chief economist said, “The nationwide shutdown of the economy to slow the spread of COVID-19 continues to create hardships for millions of households, and more are contacting their servicers for relief in accordance with the forbearance provisions under the CARES Act.

With several homeowners exploring the option of forbearance, Servicers are under tremendous pressure to handle the sudden surge and massive volume of work. Thousands are reaching out to servicers to explain their situation and ask about forbearance options. In such a situation, Servicers are required to immediately swing into action to meet the procedures and protocols to fulfil these requests.

Added work volume for Servicers

The spike in the volume of forbearance requests means an enormous amount of work for servicers. Mortgage servicers are likely to experience significant compliance and operational challenges in the coming months due to this emergency. To take care of the compliance challenges, most servicers will expect people to provide evidence that they are not able to hold up their end of the deal. The specifics each servicer requires may vary, but most of them will have to seek much of the same information they needed when considering the original mortgage application. They will have to gather Proof of Income, including pay stubs, tax returns etc., monthly expenses, including all debt payments, a list of assets, etc. They may also have to refer to the homeowner’s credit score when considering their request for mortgage forbearance.

Managing the forbearance procedures and how service providers can help

Most servicers will have to reach out to thousands of homeowners and initiate all the paperwork to meet the forbearance procedures. This is the time that servicers can turn to service providers like Visionet who are offering solutions to reduce their workload during the crisis. Visionet has been leveraging its extensive domain and technical expertise to enable servicers to efficiently and securely process large volume of documents while reducing operations cost.

To support security compliance, we also have expertise to create a special offshore development center (ODC) to meet the specific requirements. The company’s secure, seamless integration enables servicers to simplify the process of data extraction, indexing, and stacking, so they can more efficiently process forbearance requests during this time. Visionet’s range of comprehensive solutions can help servicers during this crisis to improve operational efficiency, customer retention, and maintain regulatory compliance.

The company offers solutions that leverage AI/ML-based OCR technology to deliver over 98% accuracy. These can simplify and efficiently organize complicated processes with automated workflows to face challenges.

In conclusion, at a time when Servicers suddenly have to deal with a massive spike in the number of forbearance requests, companies like Visionet can offer a robust ecosystem of automated solutions and services that can help execute the spike in work in the best possible manner. Contact Visionet today on mortgage@visionet.com !

Pitchiah Balasubramanian

Pitchiah Balasubramanian

Senior Vice President, Mortgage Solutions Senior versatile and innovative business technology leader with 28 years of progressive leadership experience in Financial Services (Banking, Capital Markets & Insurance), Textile Manufacturing, Sports, Entertainment, Transportation, and Consultancy. Providing leadership and oversight to Mortgage solutions for clients, product advisory and engaged in pre-sales activities