According to fitch reviewsnon-bank mortgage servicers should expect increased regulatory scrutiny in the coming months as pandemic-related government forbearance programs expire and borrowers transition to other permanent mitigation alternatives losses or default.
“The U.S. mortgage industry is subject to numerous federal and state regulations, which have evolved rapidly during the economic fallout from the pandemic amid the transition to more automated and remote business platforms,” Fitch said. “The Consumer Finance Protection Bureau prioritized oversight of mortgage services under the new administration.
Increased fines and/or higher regulatory capital requirements could be seen with the possible reintroduction of increased Federal Housing Finance Agency (FHFA) net worth, liquidity and capital requirements after two years of record profitability.
About eight million owners have enrolled in some sort of forbearance or loss mitigation program since the COVID-19 pandemic began in March 2020. About six million owners have since left these programs. These programs played a key role in keeping the 30-day transition to delinquency rate low; the rate fell from 3.4% in April 2020 to 0.7% in October 2021. April 2020 was also marked as a peak period for consumer complaints against repairers.
The national delinquency rate was 3.38% in December, 10 basis points above the February 2020 record low. However, loans in active foreclosure were at an all-time low in December 2021; the foreclosure rate stood at 0.24% with 4,100 foreclosures opened, i.e. 90% less than the levels observed over the same period in 2019 before the start of the pandemic.
Fitch expects foreclosure activity to pick up again this year, which likely means additional regulatory scrutiny. The 90-day delinquency rate in December 2021 was double what it was before the pandemic, but 30-day delinquencies were lower than historically due to an improving economic situation.
According to research by Fitch, forbearance plans for non-core and non-bank managers, which peaked at 71% of all loan restructuring options in the first quarter of 2021, saw a 10% drop in the third quarter, borrowers leaving forbearance agreements, while the number of loan modifications tripled to 19% from 6.6% year-on-year.