As millions of borrowers struggle to keep up with their mortgages, deed-in-lieu services offer a path forward.
With federal moratoria on foreclosures due to come to an end on July 31st, the Consumer Financial Protection Bureau (CFPB) has released their final amendments to regulations for servicers to try and assist borrowers, encouraging “borrowers and servicers to work together to facilitate review for foreclosure avoidance options.”
The White House recently estimated that 1.75 million Americans are still in mortgage forbearance and a Harvard University study indicated these nearly 2 million homeowners could be at risk of losing their homes when federal moratoria end.
One of these guidelines is to allow borrowers adequate time to pursue loss mitigation options.
Servicers are already working with many borrowers to explore the options available to them once they exit forbearance. In instances where loan modification measures simply aren’t enough to pull a borrower out from under their mortgage, a deed-in-lieu of foreclosure holds the greatest potential for a beneficial outcome for both the borrower and the servicer.
“No one wants foreclosure. It’s not in the best interest of the borrower or the servicer. Servicers want to do what’s right on behalf of their customers while making a smart business decision,” says Amy Borsi Daniel, senior vice president, Title & Close, at ServiceLink. “A deed-in-lieu (DIL) is a cheaper way to get a property back into their inventory without having to go through the expense of a full-blown foreclosure, which can take, depending on the state, months to years to complete.”
In addition to helping minimize the financial burden on a borrower, provide them with an exit strategy and protect their credit history, the servicer can capitalize on a DIL internally, in terms of cost and time savings. Working with a settlement service provider that focuses on the details of the DIL process can offer an even greater advantage.
“At ServiceLink, we do everything from the initial title work — title grading and clearance — through junior-lien negotiation, and signing and recording processes,” says Daniel. She spells out some of the benefits the right DIL partner can provide:
Speed and efficiency
The focus of a partner on the details of a DIL transaction can make the process smoother, faster and more efficient. Having a team that can manage junior-lien negotiations is particularly beneficial, Daniel says.
“We work with servicing companies and banks on behalf of their borrowers to negotiate deals that are mutually beneficial,” she says. “In the traditional DIL process, where the servicer goes directly to the borrower, that customer, who is probably already overwhelmed, may become more so, particularly when the subject of outstanding judgments comes up. Our team’s objectivity and expertise ensure a seamless negotiation process.”
Flexible scheduling of the signing of deed-related documents is another area where the right partner can cut precious time from the process. From making sure no items are missing to working out a convenient time and place for the borrower utilizing remote notary signings where permitted can provide peace of mind. Once that signing has been completed, they should record those documents on the servicer’s behalf.
More transparency into the property
As a servicer moves on from loan modification efforts to evaluating whether a borrower may be eligible for a DIL, a thorough title review is critical. Reliable settlement service providers can quickly offer insight into whether there are any liens or judgments on the property, what is outstanding, etc. The earlier the servicer can initiate this review, the better in terms of knowing whether DIL is an option for a particular borrower.
More transparency into the process
A partner that offers a centralized point of contact makes it easy to see where any particular file is in the process. “When your partner knows to the day and time when each piece in the process has happened, you have the ability to see that the files are moving through the pipeline — that certain documents have been forwarded to the borrower, for example, and that the signing is on schedule,” says Daniel. “This type of centralized approach enables not only transparency but also better-quality control than a more siloed approach, where independent departments handle different aspects of the process.”
The potential to scale
As servicers and lenders ready for the expected increase once moratoriums and other safeguards have been lifted, they will need the support of a settlement service partner that can scale quickly.
“One of the most important benefits of working with a company like ServiceLink is that we have a depth of talent and resources that enable us to shift on a dime and get things done for our clients; there is no question whether we can keep up with volume,” says Daniel. “We have been focusing with our clients on their projected volumes and capacity plans so they are prepared for whatever the future may bring. As so many borrowers will be requiring solutions, we will ensure that our lending and servicing partners have DIL capabilities to offer in support.”
Learn more about ServiceLink’s deed-in-lieu and other loss mitigation services here.