The End of the Moratorium on Mortgage Foreclosures and How It Affects Your Financial Institution

When the COVID-19 pandemic began, we had no idea of the effect it would have on the financial services industry. But we all knew one thing for sure: with so many people losing their jobs or having to endure a reduction in their hours, mortgage payments were going to fall behind on a massive scale. The government stepped up with the Coronavirus Aid, Relief, and Economic Security (CARES) Act, putting a moratorium on foreclosures for federally funded mortgages until June 30, 2021.

What this means for financial institutions is there will be an influx of forbearance cases maturing in the fall of 2021. Unless the moratorium is extended once again, and there have been steps taken in that direction, an unprecedented 1.7 million cases will exit forbearance programs in the fall. Financial institutions will need to be ready to hit the ground running by September 2021 with properly trained personnel, resources and guidance in place.

In addition, the new administration has committed to increased scrutiny over Fair Lending and Fair Servicing practices. According to a Consumer Financial Protection Bureau (CFPB) bulletin, the CFPB will “closely monitor how servicers engage with borrowers, respond to borrower requests and process applications for loss mitigation.” The CFPB has strongly encouraged financial institutions to be proactive, work with borrowers, address language access issues, fairly evaluate income, promptly handle inquiries and, above all, prevent avoidable foreclosures. “Our first priority is ensuring struggling families get the assistance they need,” stated CFPB Acting Director, Dave Uejio. “Servicers who put struggling families first have nothing to fear from our oversight, but we will hold accountable those who cause harm to homeowners and families.”

Over the past year, banks and credit unions of all sizes have developed new programs and practices to deal with the influx of forbearance cases. For some, the large number of cases, drain on resources and adaptation to a digital environment may have caused difficulty keeping up with standard compliance practices. A vital step in that direction is developing a standardized relief assessment program with well-defined, consistent eligibility requirements. With a standardized program, servicers across the enterprise will have the guidance they need to service those exiting forbearance and meet Fair Servicing criteria. Of course, there will always be cases that will deviate from standards. In those cases, the exceptions and reasoning behind them should be fully documented.

To further mitigate risk, conduct a review and analysis of your Fair Lending and Fair Servicing protocols and practices, even if a review is not scheduled at this time. This will allow you to identify any potential risk factors, address them early and tell your story with confidence. However, conducting a comprehensive review can cause undue stress and pressure on already overworked resources. Marquis can help.

The Marquis Compliance Professional Services team, known for their expertise and personal service, are well-versed in all aspects of compliance, including Fair Lending and Fair Servicing. They can perform audits and assessments to ensure you have the necessary policies, processes and procedures in place and define areas that need attention. Our turnkey solution combines industry-leading CenTrax NEXT compliance software with the experience and intuitive skills of the Marquis Compliance Professional Services experts. This powerful combination of data and specialists will enable you to identify risk factors and address them before they become an issue.

As Uejio stated, “There is no time to waste, and no excuse for inaction. No one should be surprised by what is coming.” Contact Marquis to learn more about our compliance solutions and how they can help you prepare your financial institution for the flood of maturing forbearance cases and the increased scrutiny that will follow.