Mortgage companies should be actively involved in distributing money from the Treasury Department's home aid fund to successfully help borrowers, a former housing official said during a virtual event Thursday.
While states are actually responsible for making payments, the effectiveness of HAF depends on how it impacts loan results, Brian Montgomery, former assistant secretary of the Department of Housing and Urban Development, said during the Padgett Law Group panel discussion.
Therefore, "it will not succeed without the involvement of service providers," said Montgomery, who is currently the chairman and founder of Gate House Strategies.
Mortgage firms are understandably skeptical of adding responsibilities related to another government program while retooling processes in preparation for the end of the foreclosure ban and related rule changes, but they really need to be involved, he said.
Servicers generally calculate what loss mitigation options are available to distressed borrowers with pandemic-related suspension payments based on the funds available. So the question of whether or not HAF money comes in could play a role in the fate of 1.86 million borrowers who deferred payments. The majority of homeowners involved have government loans, according to Black Knight. These include mortgages from government-sponsored Fannie Mae and Freddie Mac companies, as well as loans insured by the Federal Housing Administration or guaranteed by the Department of Veterans Affairs. A smaller proportion of private loans are held in bank portfolios or as part of private label securitisations.
States have until July 31, when the moratorium ends, to organize their HAF distribution plans. Some have complex criteria that involve trial periods and re-applications for additional funds for low- and middle-income borrowers. Trying to do damage control calculations with that flowing money could be an "organizational nightmare," said Candace Rusell, vice president of Carrington Mortgage Services.
However, states are making efforts to develop a unified application so that consistent processes can evolve over time, said Faith Schwartz, founder and CEO of Housing Finance Strategies.
“There's a bit of chaos out there, but there is a bit of alignment [also],” she said.