There are two homeowner hardship risks to watch out for in 2023, and the solution to one can help get ahead of the other. Let’s run down both quickly so you can stay proactive with your borrowers.
Capping Certain Borrowers at 6% Rates With SCRA
The first homeowner hardship risk is, of course, elevated interest rates. But, there’s a potential solution offered through the Servicemembers Civil Relief Act (SCRA).
SCRA offers protections to our servicemembers to ensure that legal or financial transactions don’t adversely affect them during military or uniformed service. Included is a benefit to reduce rates to a cap of 6% on any debts incurred prior to becoming a servicemember.
While 30-year fixed rates are down about 1% from the 2022 peak of 7.375% on October 20, 2022, the Fed has said they will maintain tighter rate policy until inflation hits 2%. With Core CPI inflation at 6% as of mid-December 2022, there’s a long way to go.
This means rates may stay over 6% for the foreseeable future, and potentially eligible borrowers include active duty members of the Army, Marine Corps, Navy, Air Force, or Coast Guard, as well as (in some situations), members of the Reserve, National Guard, and even the Public Health Service or National Oceanic and Atmospheric Administration.
Sagent’s real-time consumer, regulatory compliance, and investor data can enable servicers to see who in their portfolios may qualify, speed up offers, and ensure compliant execution on administering benefits like SCRA.
And if you’re not up to speed on SCRA benefits, please reach out using the form below and our servicing pros can take you through it.
Yes, we’ve got the industry’s most modern default management software, which is connected with real-time data sharing with our system of record and our consumer platform. But it’s about more than the technology, it’s about your ability to engage borrowers in smart ways at the right time. How many hardship situations can you prevent if you’re being proactive with tactics like this?
Being proactive is what earns trust and drives better, faster outcomes if hardships do in fact come.
Preempting Hardships With Proactive Borrower Outreach
Which brings us to the second homeowner hardship risk for 2023. A recession could put upward pressure on delinquencies, which could lead to increased forbearances and other loss-mitigation scenarios.
At their final rate policy meeting for 2022, the Fed was again quite clear they’re not going to just reverse the aggressive rate hike policy if rates moderate.
If we take them at their public statements, they’ll only ease if they get near their 2% inflation target, and they’ll hold this line even if it causes job loss and recession.
To be clear, they have a dual mandate of price stability AND full employment, but today’s 3.7% unemployment rate is near five-decade lows and the Fed has signaled they’d be comfortable with this rate rising to around 4.5%.
Either way, many borrowers already feel the strain, which will likely grow in 2023.
So again, the playbook is being proactive, and here are some tactics and reminders.
- Make sure you’re reaching out to your borrowers with mortgage health checks using truly modern technology like Sagent CARE. If they can’t do it on their phone, they might not do it at all.
- Leverage instant communications and real-time mortgage data to ensure optimal outcomes for customers in forbearance, especially during the reinstatement period when repayment amounts and balance questions are common.
- Embrace your borrowers’ desire to self-serve by offering a robust knowledge base with answers to common questions. And, within the same environment (in the case of CARE, within a couple of taps) ensure your borrowers can access smart, empathetic human advice that truly sets you apart and builds long-term relationships.
We’re being proactive with these tips for you so you can be proactive with your borrowers. And again, if you’d like to talk shop with our servicing pros, please use the form below and we’ll get right back to you.