Mortgage Servicing: Early Intervention

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When it comes to mortgage servicing, the early intervention requirements are all about helping struggling borrowers stay in their homes. While most institutions likely have procedures in place to assist delinquent borrowers where they can, you need to pay close attention to these requirements if you are a large servicer. For example, there are specific timing requirements for making live contact with the borrower, etc. Keep in mind; however, that these rules only apply to loans secured by the borrower’s primary residence.

Jerod explains more in the video.


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Let's go to page number 48. Our first segment in these three sections of helping struggling borrowers keep and maintain their homes is going to be this section called early intervention with delinquent borrowers. Now our scope again, letter A is a mortgage loan secured by the borrower's primary residence. Now, if something was the borrower's primary residence but is no longer, then this section doesn't apply. So if I vacated the property, knowing that I can't pay for it anymore and just let it go, then this section will no longer apply. That's letter A.

Letter B outlines that small servicers are exempt. There are some special rules for bankruptcy and the Fair Debt Collection Practices Act that we'll talk about here in just a little bit. I want to draw your attention. So all the action begins to happen here in letter C. Here's what's expected. You're expected to make a good faith effort, more on that in a moment, to establish live contact with the borrower regarding the struggle no later than the 36the day of the borrower's delinquency.

Now, good faith efforts to establish live contact. The original rule states that if I call someone and leave a message, that's not good enough. That's not live contact. So it's something above and beyond that. You have to make a real effort to engage the customer, to have live contact with them for it to count. Now, calling the customer and leaving a message will count towards something. So make sure that gets documented in the servicing file. At the end of the day, you can't help those that won't help themselves. So if I'm contacting Diane and she's just not picking up the phone, if I'm writing her letters and she's just burning them, I mean, we're not going to be able to make live contact, but those efforts do need to be documented. So make sure that's part of that servicing file.

It also stated that in relation to the COVID-19 rules that came out recently, a set of COVID-19 rules related to mortgage servicing came out in July of 2020. There's also a set that just came out, effective August 31st of 2021. What it states, give another example of what's not good faith, and so if it's something related to a COVID hardship, you can't just send something or provide something with a sentence that says request the borrower contact you. Let me back up. It's the last part of that paragraph underneath the letter C. It says providing no more than a sentence request that the borrower contacts the servicer is not good faith. You got to give more than that. More of an effort is required on your behalf.

So you've got to attempt to make this live contact no later than the 36theday of delinquency for this struggling borrower. What are you doing when you make that live contact? Bottom of page 48, number two, and we've got some new stuff here. So the original rule stated that when you make this live contact, you're to provide options for the struggling borrower. Options like loss mitigation. Under the original rule unrelated to COVID-19, it was at your discretion what options at this point in the game you provide the consumer. There's another thing coming shortly. There's a notice where you'll outline the options, but here on day 36 or earlier, you're simply contacting the customer to discuss options, and you have discretion on what gets provided at that point.

Now we have a new rule about COVID-19-related hardships, which is the last part of number two on page 48. Those options at the time of live contact before day 36 are not at your discretion. If you have somebody that when you make live contact with them, present a COVID-19-related hardship, it's your responsibility to get that out of them. You have to ask them, "Are you experiencing a COVID-19-related hardship?" If they are, the options are not at your discretion. You will be required to list the specific options I will outline for you on the next page. We'll get there in a minute.

So it's important that you understand that if it's unrelated to COVID-19... So if you call me up and say, "Jared, what seems to be the problem?" If you find out that whatever hardship I'm dealing with, whatever struggle I'm having is unrelated to COVID-19, then the options are at your discretion. But if in our interaction, we're able to identify that whatever I'm struggling with is a result of or related to COVID-19, then you're going to specifically have options that you must present to the borrower.



Jerod Moyer

Jerod is the leader of Banker’s Compliance Consulting’s training productions. He is a nationally recognized speaker. Whether it’s a conference, seminar, school, webinar or luncheon, it’s easy to stay engaged when he presents due to the amount of passion and energy he brings to each and every compliance topic. Jerod has spoken on behalf of the American Bankers’ Association, BankersOnline, many state banking associations, private compliance groups and financial institutions. He is a Certified Regulatory Compliance Manager (CRCM) and BankersOnline Guru. Jerod likes to spend his time (between reading regulations and producing compliance training!) relaxing at the lake with his wife and three children, following their activities or engaged in something sports-related!

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