by Steve Crocker, SVP, Pre-Foreclosure Title Services
FHA’s Payment Supplement and the VA Servicing Purchase program present mortgage servicers with time-sensitive challenges. Working with a proactive partner can help.
Mortgage servicers understand the struggles of American homeowners today — particularly those who are among the more than 3 million families in single-family, owner-occupied homes living below the poverty level and borrowers making sacrifices such as skipping meals, selling belongings and working extra hours to make their monthly mortgage payments. Although the poverty rate is somewhat lower among veterans, many of them are also facing financial hardships causing them to become delinquent in their mortgage payments.
Servicers place a high priority on working with borrowers to keep them in their homes through loan modification solutions. But providing borrowers with the best options and assistance can be a complex undertaking, particularly as government programs and regulations continually evolve.
In recent months, for example, new programs launched by the Federal Housing Administration (FHA) and the Department of Veterans Affairs (VA) are causing mortgage servicers to update their technology and workflows to accommodate program requirements. Servicers are required to begin acting on borrowers’ behalf for the VA Servicing Purchase (VASP) program by October 1, 2024, and for the FHA Payment Supplement by January 1, 2025.
VASP Program
Designed to help as many as 40,000 veterans experiencing severe financial hardship avoid foreclosure, VASP is described by the VA as a “last resort” tool in its suite of home retention options for veterans. Through this program, the VA purchases defaulted VA loans from mortgage servicers, works directly with borrowers to modify the loans, and then places them in the VA-owned portfolio as direct loans. A fixed 2.5% interest rate helps provide eligible veterans with a consistent, affordable payment for the life of their loan. Servicers are responsible for identifying qualified borrowers, based on a review of all home retention options available and qualifying criteria, and submitting requests on the borrowers’ behalf (veterans may not apply directly).
The VASP program’s initial effective date of May 31, 2024, met with some resistance from mortgage servicers, given the regulatory complexity involved, so the VA extended the implementation date to October 1, 2024.
FHA Payment Supplement
This new loss mitigation tool supports owners of FHA-insured, single-family homes who are behind in payments by enabling servicers to reduce their monthly mortgage payment by as much as 25 percent for up to three years without modifying their current interest rate. In short, servicers use funds from a partial claim to pay any arrearages and bring the borrower’s mortgage account current. The remaining funds are deposited into an FHA custodial account to be managed by the servicer, who uses the funds to temporarily supplement the principal and interest portion of the borrower’s monthly mortgage payments.
Servicers were given the go-ahead to begin offering the FHA Payment Supplement on May 1, 2024, and are charged with implementing it for all eligible borrowers by January 1, 2025.
How the Right Partner Can Help
Faced with new regulatory guidelines related to these programs, servicers need to take quick action. Working with a seasoned partner who can do some of the heavy lifting can be a true advantage. Consider ServiceLink, for example: Our staff of mortgage industry experts has been handling loan modification programs and the associated complexity for decades, and our capabilities cover everything from technology, functionality and workflow to reporting.
Here are some of the products and services that support program implementation:
1. Title reports. If you’re a servicer navigating the modification process, you want to know right out of the gate what you’re looking at from a title perspective. ServiceLink quickly identifies any title impediments — issues you may need to address before moving forward with the loan modification.
2. Document generation technology services. Once the title process has been completed, ServiceLink’s proprietary document generation and closing technology platform powered by EXOS®, enables the customization of loan modification documents and templates to meet new and established requirements set out by FHA, VA, USDA, Fannie Mae or Freddie Mac. Right now, ServiceLink is working with clients to customize forms to meet the specific implementation needs of the FHA Payment Supplement and VASP programs.
3. Borrower outreach for signing. Taking borrower preferences into account, ServiceLink has the ability to send a text or place a call to schedule a traditional signing service or an online notarization (RON) closing. When the borrower selects a RON closing , they simply join a call with the ServiceLink notary at the date and time they have chosen. Equipped with a good internet connection and webcam or camera phone, the borrower can be validated and sign their documents. Improving the signing timelines with an average signing taking place within five minutes with an online signing process — compared with the traditional wet signing process averaging weeks for an in-person signing /meeting to take place.
4. Recording. ServiceLink can then electronically record the signed documents or send them to the county recorder’s office in any of the 50 states.
ServiceLink offers servicers a strategic solution to meet the changing needs of servicers. With the advantage of working with many large, mid-size and smaller mortgage servicers and banks, we understand firsthand the challenges of striving to comply with new guidelines and the challenges that come with adherence to these ever changing guidelines. We apply the best practices we’ve identified working with partners in the loan modification space to get everyone up to speed quickly. Regulatory complexity becomes much less complex when your team has the support and tools they need to succeed.
