How the real estate ecosystem can empower and educate borrowers about mortgage relief | ET REALITY


Every borrower wants to believe that their home buying process will be easy, without financial difficulties or late mortgage payments. But as the past few years have taught us, unforeseen events like COVID-19, natural disasters, inflation, and low affordable inventory make mortgage relief awareness critical.

Because homeowners were not thinking about unexpected events or difficulties when they purchased their home, they probably do not consider relief options when faced with a default. They may think it is impossible to catch up on their payments or worry that they are in danger of foreclosure.

A more connected housing ecosystem of lenders, servicers, real estate agents, housing counselors, and other professionals working together can provide ongoing education and proactive intervention to help overcome these challenges.

Early and ongoing education helps owners prepare for the unexpected.

Homeowners who are anxious about making payments or don’t understand the mortgage process often ignore correspondence from their servicer for fear that it is bad news, when it could just be a simple servicer change notice.

For those borrowers who have late or missing payments, early involvement is crucial. The longer the loan is delinquent, the less likely they will be able to take advantage of loss mitigation solutions, according to Donna Spencer, vice president of servicer relations and performance management at Freddie Mac Single Family. “Continuing homeowner education should be the new standard,” she said.

Currently, borrower education occurs primarily with the servicer. However, there are opportunities for greater collaboration with freddy mac and fanny mae and with mortgage professionals for an integrated approach that best supports the homeowner.

“All borrowers should have access to information that allows them to make sound financial decisions and continue making their mortgage payments,” Spencer said. “If you can educate borrowers about their options before a life event, when one occurs it will be all about taking action.”

Mortgage professionals can overcome these barriers by helping borrowers understand what to expect over the life cycle of their mortgage.

“Laying the foundation for what interactions might look like over the course of some of these life events can help borrowers be more successful, have fewer interruptions in their payments, and maintain their credit profile for future home purchases,” said.

Relevant disclosure creates a personalized touch and builds trust.

Spencer notes that some managers are taking creative approaches to providing guidance tailored to an individual owner’s specific needs and situations, including personalized communication and using data to help identify and assist with early intervention.

Automated communication to homeowners about applying for mortgage relief, for example, can be a quick follow-up after a borrower stops using autodraft for monthly mortgage payments – a predictive, proactive and relevant message that can prevent default of the loan.

Similarly, an escrow analysis requested by the borrower after receiving an adjustment notice can be included with a short video explaining the reason for the increase, and text message links to informational clips can better describe the requirements. eligibility and the process of requesting a payment deferment or loan modification. Both forms of disclosure provide comprehensive, easy-to-use guidance on mortgage processes that may be unfamiliar to the homeowner.

However, sometimes the best guidance for borrowers, including those who do not qualify for a loan modification, is not to pursue a home retention option.

Instead, housing professionals across the ecosystem, from real estate agents to lenders to managers, can suggest potential improvements that would produce maximum property value, allowing homeowners to use their equity as a tool for a clear exit strategy. and move to a more affordable property. .

“This is becoming a bigger opportunity because of home price appreciation,” Spencer said.

If a borrower is unable to recover financially from a life event, options like selling their property allow them to exit homeownership with dignity, rather than going down the path of foreclosure.

And integrating debt management companies into service operations, which help with budgeting, debt repayment and creditor management on behalf of the homeowner, helps reduce recidivism.

Housing counselors help close the gap.

Another opportunity to improve homeowner education is to integrate housing counselors as a resource.

“Housing counselors can provide any post-purchase education the borrower may need,” said Stacey Walker, director of affordable lending at Freddie Mac Single-Family.

This may include information on how to budget and what to expect after purchasing a home, tips on home maintenance, scams to avoid, disaster responses, what to do if a borrower becomes unemployed, what to expect from a conversation. with the servicer and mortgage relief options.

But there are misconceptions to overcome, including that their services are expensive. While the US Department of Housing and Urban Planning Development (HUD)-Approved counseling agencies may charge reasonable and customary fees if they do not create a financial hardship, Walker notes that many of the services are provided at no cost to the homeowner.

Additionally, all counselors working at HUD-approved agencies must undergo a rigorous process to obtain HUD certification. This includes passing a written exam that demonstrates competency in six key areas and following national industry standards for homeownership education and counseling.

“For homeowners, there is often less apprehension than talking to a manager,” Walker said. “A borrower may benefit from an initial conversion with a housing counselor, giving them time to process their options before contacting their servicer.” She cites the Freddie Mac Borrower Help Centers and Network and the Directory of housing counseling agencies on the HUD website as particularly useful resources.

Freddie Mac tools and solutions provide mortgage relief.

Freddie Mac offers effective default management solutions servicers can offer homeowners facing financial hardship, including payment deferrals and the Freddie Mac Flex Modification.

“Freddie Mac, servicers, housing counselors and other mortgage professionals can remind borrowers facing a life event that they do have options,” Spencer said. “Borrowers can leverage one or more solutions from our toolkit to get back on track.”

Walker adds that housing counselors who work with Freddie Mac can work directly with homeowners to ease their concerns. “These professionals are educated about our loss mitigation tools and solutions so they can assist borrowers who call them with questions and provide them with information,” Walker said.

Above all, mortgage professionals trying to help borrowers understand their options in the event of a life event or disaster must keep the lines of communication open from the home purchase and beyond. As Spencer said, “When we collaborate on homeowner education throughout the mortgage lifecycle, we promote sustainable homeownership and mitigate risk.”

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