Most federal forbearance options and COVID flexibilities are winding down or have already ended.
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Hello, LOs!
Most federal forbearance options and COVID flexibilities are winding down or have already ended. A recently released Consumer Financial Protection Bureau report found the relief programs left the average consumer on better financial footing than they were before the pandemic.
The end of those programs could lead to "increased consumer distress unless the economic recovery is strong and equitable enough to make up for the loss of protections," the CFPB warns.
Among mortgage borrowers who missed a mortgage payment, more than three quarters received some form of forbearance flexibility. Compare that to renters who had trouble paying their bills: Among renters who missed or deferred a payment, 38% said they received assistance. And before February 2021, the flexibility came from landlords, not the federal government, as "almost no federal rental assistance was dispersed" by then, the report noted.
Consumers who needed the help during the pandemic might have used the temporary leg up to save for a down payment, and be in a better position now to take on a mortgage. But a period of missed or inconsistent payments — perhaps while awaiting federal rent assistance — could make underwriting loans for those borrowers more complicated.
One LO I spoke to said that in such situations, to be fair to the borrower, it would make sense to run the loan by a scenario desk, or a team of underwriters. But he acknowledged that can be a costly and drawn-out process, and underwriters are already in short supply.
LOs, are you already working with borrowers who have COVID-irregularities in their finances? What best practices have you developed? Send a note to gkromrei@housingwire.com
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Instead of asking borrowers about their finances and then initiating a weeks-long paper chase to determine if the information provided is trustworthy, lenders should go straight to the source financial institution or other recordkeeper to learn the truth about a borrower's employment, income and assets.
Blank check company Aurora Acquisition Corp. said last week that Vishal Garg is still Better.com's CEO, and that it will keep the proposed merger with the digital mortgage lender.
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