The mortgage servicing industry has been on pins and needles during the duration of the COVID-19 pandemic. Recently, they received some relief from the FHFA
, but the overwhelming number of borrowers who applied for forbearance, or that were unable to pay their mortgage is continuing to increase. A recent report from Bloomberg Law
revealed that the volume of mortgage transfers could pose risks to borrowers.
In his report, Evan Weinberger revealed that issues transferring loan files are elevated in times like this for distressed servicers. He cited Ditech Financial Inc.'s halt on "proposed sale of servicing assets" last August, after homeowners said their files contained a large number of errors. He added that this becomes even worse when a large number of loans are being modified, to help provide relief in the form of forbearance for a borrower.
"A traditional loan modification that alters the terms or principal due on a mortgage requires a great deal of paperwork, with copies given to the borrower. A forbearance is often a verbal or otherwise informal agreement that might be hard to prove if loan files have errors or are misplaced in a servicing transfer," said Jason Bushby, a partner Bradley Arant Boult Cummings LLP, according to the report.
to read more about why mortgage transfers could put mortgage borrowers at risk.