PANDEMIC BECOMES THEIR BID TO IMPROVE AND EVOLVE
In the previous blog, we discussed how the Originators have been trying to act empathetically towards the unexpected economic crisis brought in by the COVID-19 pandemic. We conferred about a couple of risk assessment avenues that the originators have discovered such as Profitability and Capital Adequacy and Credit Access.
Taking it forward from there, in this blog, we will try to analyze and learn about a few more avenues that the originators are exploring to keep their businesses up and running.
Prior to that let’s just go through the Consumer Financial Protection Bureau (CFPB) guidelines owing to their utmost relevance with the present and upcoming Mortgage Industry situation.
Under the Economic Security (CARES) Act, Coronavirus Aid Relief and guidance from the GSEs and Federal Agencies there are two major relief measures for homeowners with federally backed or GSE funded (Freddie Mac or Fannie Mae) mortgages.
- The lender may not foreclose any of his/her clients at least until August 31st 2020; the protection was implemented starting 18th March 2020.
- In case of financial hardship, the homebuyer has the right to obtain or request for a forbearance for up to 180 days, which can be extended up to another 180 days (so up to a total of 360 days) based on a document attesting pandemic induced financial hardship.
In accordance with the aforementioned guidelines, the Mortgage Originators are analysing some more walks and possibilities that will help them stay afloat during and after the pandemic, which are as follows:
Credit Risk Profiling: In a situation like this, experienced industry players are likely to define two aspects at an extensive rate:
- Credit Exposure
- Credit Worthiness Assessment
The profiles, which were considered safe by the banks in the pre covid period, might need revision in the coming days. According to several seasoned underwriters, the evaluation process for long-term exposure will be difficult for certain industries and profiles. They also think that income and stability restoration for some segments of the borrowers will be crucial in the post-pandemic times. The lenders need to start considering these default profiles well in advance and plan accordingly.
Focus on Digitalization and Service Efficiencies: Lenders and bankers are expected to put great emphasis on developing hassle-free services in the upcoming months in order to reduce substantial stress on their infrastructure and people. Many customers have already started reaching out to their lenders to understand the Refinancing Options they can avail. Attending them should be the first priority for Mortgage Originators right now. This is not just in the light of their clients’ interest but theirs too for on-going interactions with their customers will help lenders understand their present standing as well and therefore they can remain prepared.
In the meanwhile maintaining existing clients who are at the functional state and keeping them satisfied also form one of the primary requirements for the Mortgage Business. Reaching out to an experienced Outsourcing Partner can be a viable option for lenders right now since that will assure them of getting their usual jobs (such as Underwriting, Closing, Post-Closing etc.) done with ease.
In the upcoming blog, we will discuss the aspect of Delinquency and Risk Management. Although this will not be a very immediate challenge for lenders, if left unmonitored, it might cause a serious threat to their businesses going ahead. So, hang on!