Ed Delgado, the president and CEO of Five Star Global, LLC, has been on the phone a lot of late. In a break between conversations, Delgado found time to talk with Dodd Frank Update about a new task force being formed to address mortgage industry issues surrounding the coronavirus.
“It’s more information than we’re capable of disseminating – it’s light speed at this point,” Delgado said.
The COVID-19 Mortgage Industry Task Force, under the direction of the National Mortgage Servicing Association (NMSA), has been created to coordinate on processes, procedures and policies related to the crisis.
More than 25 mortgage banks and nonbank servicers, legal professionals, and service providers will take part in the coalition, including names such as PennyMac and Mr. Cooper, while leadership from legal professionals and service providers are providing context to the discussions, according to a notice from Five Star Global.
“It’s important during crises like this that our industry work together to help our customers in unison,” said Wes Iseley, senior managing director at Carrington Mortgage Holdings and the chariman of the NMSA, in the notice. “It is our goal to work with the relevant government agencies in order to develop best practices that will enable all parties to get through this difficult period.”
The need for the task force became apparent as the speed of the COVID-19 disruption grew exponentially.
“It’s moving at a speed that we can’t keep up with, seven days a week,” Delgado said. “It’s a dynamic information exchange between banks, nonbanks, service providers, legal professionals and regulators. There’s untold calls taking place regarding solutioning.”
Conversations began with emails and phone calls as participants across the transaction reached out for answers when federal and state health officials began actions that would lead to business disruption.
“You forgot text messages,” Delgado said with a slight laugh, “… it was a little bit of everything, anything to get everyone on the same page. There was a need to caucus and set forth strategy – notwithstanding the guidance coming from FHA and HUD – to self-police programs so we are ready to respond.”
Finding participants willing to work together has been easy as the disruptions have unfolded, Delgado said, adding that it is generally not hard to gain collaboration during a point of crisis.
“COVID-19 has a grip on the nation, and that has created an immediate response from stakeholders across the industry to gather and seek solutions – both immediate solutions and long-term solutions,” he said.
That collaboration has included a wide spread across the industry, because the current disruption can affect so many partners in the transaction.
“This task force is gathering information, making proposals and engaging service providers – because those organizations are going to be dramatically impacted,” Delgado said.
The starting point was determining what muscle memory the industry had of dealing with sharp downturns, and then looking at what this disruption looked like it could do to the mortgage industry.
“There’s things we know make sense: suspend credit reporting, delaying foreclosures, delaying evictions,” Delgado explained. “But the second part of the conversation is a little more unknown. Are we entering into a recessionary period, and if yes, how shallow will that be, and over what period of time are we looking at an economic disruption?”
The servicing industry has not been stressed in this way in years. A CoreLogic report issued March 15 showed the nation posted the lowest overall delinquency rate for a December in at least 20 years. The share of mortgages that transitioned from current to 30 days past due in December was 0.8 percent, down from 0.9 percent a year earlier.
By comparison, CoreLogic said, before the start of the financial crisis, in January 2007, the current-to-30-day transition rate was 1.2 percent, and that peaked in November 2008 at 2 percent.
Overall, 3.7 percent of all mortgages were 30 days or more delinquent in December, down from 4.1 percent a year earlier.
The Office of the Comptroller of the Currency issued its report on fourth-quarter 2019 mortgage performance, showing that 96.5 percent of mortgages it reviewed were current and performing at the end of December, up from 95.8 percent a year earlier. The report covers more than 29 percent of all residential mortgages in the country.
“We’ve been operating in the best of times the past two years, but what we are dealing with now, this is not a slow burn. This is an immediate aggravation of the housing market,” Delgado said. “Whether it’s the hotel industry, the airline industry, now the auto industry, we are going to have an economic disruption.”
And what is the primary goal of the task force in addressing such a sharp disruption? Directional consensus, Delgado said.
“You don’t want to have a disparity in the treatment of homeowners,” he said. “We saw that in the 2008-2010 time period – we had a great deal of volatility in terms of people thinking what was in the best interest of homeowners, what was in the best interest of government agencies, what was in the best interest of investors.
“Achieving consensus is not easy to do, but ultimately, it benefits the homeowners, and that’s what you want. You want that collaboration, you want that transparency. Not everyone is going to get everything they want, but if we can agree to collaborate for the benefit of the homeowner we can move swiftly into that strategy.”
To that end, the talks among task force members are coming fast and furious.
“There’s collaboration and consistency in communication. When you have those three Cs, this industry is incredibly responsive to the needs of homeowners,” Delgado said. “And they can take some solace in knowing that some of the best and brightest are working together.”
Noting that the task force was interested in being inclusive, Delgado said industry participants who would be interested in participating in the task force are encouraged to email him at ed.delgado@fivestarinstitute.com.