Property Inspections for FHA Properties in Forbearance

A recent report by the New York Federal Reserve found that borrowers with FHA-backed mortgages were more likely to enter forbearance and eventually end up in delinquency as an outcome of the pandemic. Therefore, clients should be aware that FHA loans may hold unforeseen risk when it comes to forbearance and property inspections.

Fannie Mae guidelines require servicers to order an initial property inspection on or after the 60th day of delinquency and complete the inspection no later than the 75th day for all delinquent mortgage loans. These inspections are needed to ascertain the condition of the property prior to a potential foreclosure. Fannie Mae prohibits inspections if the account was current prior to start of a COVID forbearance or if the property was occupied prior to a COVID forbearance.

FHA’s handbook does not provide specific guidance related to COVID forbearance. Servicers and subservicers have been directed to follow FHA’s standard guidelines, which does not require an initial inspection if contact has been made with the homeowner. Under ordinary circumstances, this difference would be insignificant, because the period between forbearance and foreclosure would be a matter of months. The CARES Act, however, allows for 18 months of forbearance and a total of 15 months of delinquency – a longer period than previously envisioned. Cenlar has followed all industry guidelines throughout the pandemic, and will continue to do so once forbearance ends. To this end, Cenlar will only undertake FHA forbearance inspections when one of FHA’s preexisting triggers are present. These conditions include notification of a violation, awareness that a property may be impacted by a physical disaster, or reasonable belief that the property has become vacant.

Martin Foster Joins Cenlar as Senior Vice President of Servicing Operations

We want to wish a warm welcome to Martin “Marty” Foster, a 35-year veteran in the mortgage banking industry, who has joined the company as Senior Vice President of Servicing Operations. Initially a consultant to Cenlar, Marty was instrumental in helping our loss mitigation team to prepare for the volume of homeowners requesting mortgage assistance during the pandemic.

“We are pleased to have Marty on board at Cenlar,” said Rob Lux, Executive Vice President and Chief Operating Officer at Cenlar. “Marty will be responsible for automating processes and further building our high-performance team to improve the experience for both our clients and homeowners.”

Prior to joining Cenlar, Marty was Senior Vice President of Servicing and Post Closing at PHH Mortgage where he directed mortgage servicing and post-closing operation across multiple sites. He has particular expertise in using technology to augment legacy systems and manual processes.

Marty’s goal is to build upon current operations by leveraging both people and technology to create a seamless subservicing platform that provides value to our clients and their homeowners. As part of that process, he plans to identify more opportunities to leverage automation across the organization and identify talent to drive performance. “We’ll be placing greater reliance on technology tools and programs that deliver timely and effective solutions for clients and their homeowners,” said Marty. “Our telephony and digital capabilities will be enhanced. In addition, we plan to leverage automation and other workflow applications to provide more timely and effective assistance to homeowners and enhance our regulatory oversight and controls.”

Pandemic-Related Inflator

Our August 2020 Client Advisory described in great detail the process and work required to comply with Fannie Mae and Freddie Mac balloon-deferment resolution options for CARES-eligible borrowers. The GSEs have extended foreclosure moratoriums to June 30, 2021. The CFPB proposed rules, which are likely to be published next week, include providing a mandatory 120-day review to ensure each homeowner receives an appropriate workout opportunity.

As a subservicer, we continually revisit this outlook monthly so that we can staff appropriately, adjust for regulatory changes, increase vendor support and manage costs. To help defray these additional costs related to the continued support of pandemic forbearance and resolution activities, Cenlar will apply the annual inflator to the COVID 19 fees announced last year. This inflator is effective with our June 2021 invoices. Our team appreciates the opportunity to serve you and your borrowers. Your satisfaction is the ultimate barometer of our success.