“Through this recovery, continuing to put our finger on the pulse and look at the data we have at our disposal is enormously important to see where insurance or uninsured trends are heading and how it is going to impact our industry moving forward.”
Allied’s 2nd Vice President of Mortgage Solutions, Phil Reinking, and Director of Mortgage Solutions, Joey Nemeroff, recently discussed the state of mortgage servicing in a webinar with the Mortgage Bankers Association (MBA). The duo reviewed market conditions, presented information about changing compliance and regulations brought on by the COVID-19 pandemic, shared data Allied Solutions is seeing, and discussed tactics to develop a compliance-focused approach to mortgage servicing.
Below we highlight the main points shared during the webinar.
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Mortgage Servicing Environment
Many temporary regulatory measures remain in place due to the COVID-19 pandemic. To date, the pandemic has led to over 100 million cases worldwide, high unemployment, and disruption across industries when it comes to work and travel.
Industry moratoriums and loan forbearance measures halted and deferred servicing due to the global impact and fallout of COVID-19 cases. State-by-state guidance and mandates put in place have provided grace periods and other relief to consumers and organizations. So far, these measures appear to have been effective in offering borrowers financial flexibility and allowing time for financial institutions to implement business continuity measures.
Mortgage Servicing Impact
In part due to the ongoing pandemic, little regulatory change has been seen in the last six months outside of federal flood regulations when looking at mortgage servicing. It’s uncertain if this is normal or signs of an impending storm for the servicing industry as many of the temporary relief measures in place obscure the true state of the economy.
While auto saw a drop in insurance cancellations, mortgage trends have remained flat. This may be due to mortgage coverage remaining less sensitive to the immediate environment or current regulations in place that require certain coverages and a slow year for regulatory change.
At Allied, we observed the following trends from our mortgage servicing program:
- For homeowner non-renewal rate, we expected and saw a sharp rise at the start of the pandemic. However, rates have since fallen to below even normal trend rates of 2-2.5%.
- For homeowner cancellations, we observed no changes in cancellation rates.
- For flood insurance cancellations, we expected and saw a sharp rise at the start of the pandemic, but saw a similar rebounding back to normal levels. The NFIP expanded its grace period and communicated with clients regarding regulations, so there has not been an increased penetration of force placement.
- For auto insurance, unexpected trends emerged with depressed claim and insurance activity. This could, in part, be attributed to additional unemployment and stimulus funds leading to record highs in savings for families.
Ongoing Industry Challenges
COVID-19 disruption remains an issue, with institutions facing challenges of managing resources, accommodating service needs, and handling remote limitations.
- Operations Delays: Servicing and renewals saw delays from all stakeholders. The grace period helped all parties— providers, insurance, and the post office— adapt and pivot throughout the pandemic. Timeliness has been impacted by mail and other manual processing delays.
- Adapting Manual Processes: With mortgage servicing, some functions can be remote, but other processes cannot (e.g., mail and check processing). The industry depends on mail handling and payments by checks, both of which require manual processes and are difficult to achieve in virtual environments if the infrastructure and tools aren’t available to employees, clients, and consumers.
- Understanding a New Normal: An influx of new measures and remote work policies have—at least temporarily and perhaps permanently—changed the ways we work. These short-term adaptions may have long-term implications as virtual work becomes more normalized and temporary measures become more permanent.
These challenges demonstrated a need for the industry to embrace a shift to digital and away from manual processes where possible. Tools such as EDI, OCR, and RPA provide an electronic exchange between servicers and providers. They also help automate certain processes. Digital communication tools to correspond with borrowers and verify insurance have also ramped up to better benefit consumers. While these challenges persist, there are reasons to be optimistic across the industry as servicing trends return to normal, quality of remote engagement increases, and the economy continues to open back up.
The final takeaway: “Be prepared. Let’s use this [pandemic] as an opportunity to look at the next time there is a major service disruption, how will we as an industry be more prepared to tackle it and continue our regulatory compliance and adherence with our service commitments.”
Want to Learn More? Learn more about Allied’s Mortgage Servicing Solutions