Repayment Options Are Crucial to Forbearance Strategy

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The entire mortgage industry is focused on making sure that we assist borrowers during this challenging time. I am very proud of the work we as an industry are doing and recognize that it is vital to the ability of Americans to stay safe and sheltered while maintaining some stability during this pandemic and its associated uncertainty and fear.

Mortgage servicers are on the front line, dealing with the millions of borrowers impacted by COVID-19 and implementing the forbearances granted by Congress through the CARES Act. It is a fluid situation, compounded by the challenges that mortgage servicers — like all businesses — face in the current environment where employees must work from home. The demands are severe, and servicers are rising to the challenge.

It is perhaps inevitable that in such a rapidly unfolding situation, some confusion and mixed messaging will occur. MBA has worked with regulators and others to address issues as they arise and get consensus interpretations of newly implemented programs like the forbearances required under the CARES Act.

One issue that arises persistently is the misperception that a borrower must repay the deferred payments in a lump sum at the end of the forbearance period. We are seeing it frequently in news stories, and we are hearing about it from policymakers who are receiving unnerving reports from their constituents. The narrative threatens to overshadow the work that servicers have done to successfully place more than three million consumers on forbearance plans in just a few short weeks.

Fannie Mae and Freddie Mac have given clear guidance that immediate repayment of arrears is not a required solution for CARES Act forbearances. The GSEs released forbearance scripts — located here and here — to assist servicers as they guide homeowners who have experienced a hardship as a result of the COVID-19 pandemic through their options. I encourage servicers to use them. If the scripts are unclear or do not raise issues you are confronting, please let us know.

Finally, I know that while the CARES Act covers a significant majority of the market, it is not the standard for the entire industry. Investors or owners of loans that are not federally backed should ensure that their borrowers also have exit options from forbearance that help borrowers repay their obligations while availing themselves of forbearance if needed.

Helping distressed borrowers is what servicers do. We must do everything we can to get borrowers into forbearance if they need it, with as little uncertainty and pain as possible. That means making them aware of all the repayment options that could be available to them when their forbearance ends.

 

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