3 Lender Impacts Of Biden Extending Forbearance Relief To 18 Months

The White House just announced key expansions of COVID foreclosure and forbearance relief programs. This will help struggling borrowers and the housing economy weather the pandemic, and it also brings another round of changes for mortgage lenders and servicers to stay on top of. Below is a quick briefing on the three main components of this policy move, and key takeaways for servicers.

1. Total forbearance period can now be up to 18 months

Recall that the CARES Act provided borrowers with up to 12 months of mortgage forbearance, equally divided into two six-months periods. A borrower who theoretically entered forbearance around April 1, 2020 is now nearing the end of their 12 month forbearance period. 

According to the latest MBA data, 81.4% of borrowers are now in their second six-month forbearance period with just 16% still in their initial forbearance periods (see Figure 1 below).

 

Figure 1

 

Meanwhile, forbearance exits have stalled, and month-over-month overall forbearance volume remains steady (see figure 2). We know that the longer you’re in forbearance, the harder it is to get out. With vaccine distribution is still limited, it is apparent that it will be some time until the economy can return to pre-pandemic employment levels. 

 

Figure 2

 

For this reason, I’ve been predicting that the Biden administration would extend forbearance periods, and now it just happened.

This White House housing policy move will “provide up to six months of additional mortgage payment forbearance, in three-month increments, for borrowers who entered forbearance on or before June 30, 2020.“

 

2. Forbearance applications can now be made through June 30th

Enacted in April 2020, the window for CARES Act-enabled forbearances ran through the end of April 2021.

This update from the White House seeks to extend the enrollment period for new forbearance requests through June 30th.

For borrowers who ran into financial trouble later into the pandemic, this will be key to providing hardship relief into the summer for those still struggling.

 

3. Foreclosure moratorium extended through June 30th

Finally, this announcement also extends the foreclosure and eviction moratorium — initially announced by the USDA, Single Family Housing Direct Loan Program (SFHDLP), and the Single-Family Housing Guaranteed Loan Program (SFHGLP) on January 20, 2021 — to be extended through June 30, 2021.

 

Implications for Servicers

Here are a few things mortgage servicers need to take away from this policy move. 

1. This move makes it clear the Biden Administration wants to help strained Americans on housing. They have already signaled possibly extending the foreclosure moratorium until September 30. And until vaccines proliferate, millions still need help.
2. This move means servicers must be ready for two things (1) another spike in borrowers needing/wanting fast forbearance extensions, and (2) borrower outreach to help them navigate the complexity of these constantly shifting deadlines.
3. Servicers must be real-time on borrower care and compliance with complex rule changes. And while policy relief delays progression from forbearance to loss mitigation and beyond, servicers still must be ready with scale default management now.
4. Sagent’s loan servicing, default management, and customer care platforms powered this for servicers during the CARES rollout with modern borrower self-serve and real-time configuration (rather than coding) for real-time policy changes. And now we’ll do it for servicers again.

Policy relief is great for housing stability as long as it doesn’t break your operations. I’ll keep you posted on policy changes in real time, and Sagent will keep powering your servicing and borrower care operations in real time.  Please reach out below with any questions.