Podcast
ComplianceAugust 11, 2020

Episode 5: Loss Mitigation: Operational Challenges in a Pandemic Environment

By: Samir AgarwalChris Zimmerman

Banking Compliance Insights is a podcast series created to deliver insights on compliance trends and provide strategies for navigating today's regulatory and risk environments.  In Episode 5, we take a deep dive into what to expect at the end of allowable forbearance periods required under the CARES Act. During the podcast, our experts will discuss:

  • The wave of borrowers that will require post-forbearance workouts.
  • Servicers concerns about the capacity to handle the impending wave of loss mitigation workouts.

Wolters Kluwer® Vice President, Banking Compliance Solutions, Samir Agarwal interviews Chris Zimmerman, a Product Manager for Servicing Technology Solutions to provide best practices for operationalizing servicing in a remote environment. They will also offer strategies and policies to assist your institution with multiple pandemic-driven challenges, including an influx of loss mitigation workouts.

Podcast product spotlights

Wolters Kluwer offers our award-winning Expere® Servicing & Loss Mitigation solution, which includes compliant documents needed to support Investor/Insurer loss mitigation programs, as well as documents required in the pre-foreclosure process. In addition to compliant documents, your institution can utilize Wolters Kluwer E-Sign solution to facilitate electronic signatures, and you can also engage our printing and mailing services. Wolters Kluwer supports servicers through our consulting services and Fair Lending Wiz®

Transcript:

Greg Corombos, News Director at Radio America  00:06
Hi, I'm Greg Corombos. Welcome to Banking Compliance Insights, a podcast series from Wolters Kluwer. This series was created to deliver insights on compliance trends and strategies for navigating today's regulatory and risk environments. Today's episode, “Loss Mitigation: Navigating Operational Challenges in a Pandemic Environment,” will focus on steps servicers can take to prepare for the wave of forbearance requests that is anticipated at the end of allowable forbearance periods required under the CARES Act. Here to lead our discussion on this subject is Wolters Kluwer’s Vice President of Banking Compliance Solutions, Samir Agarwal. He is joined today by Chris Zimmerman, Senior Technology Product Manager with Wolters Kluwer to provide expert insight on these challenges. Samir, let me pass the conversation over to you.

Samir Agarwal, Vice President, Banking Compliance Solutions, Wolters Kluwer  01:00
Thank you, Greg. Today, we're going to look at another side of the COVID-19 response from our government and lenders across the nation, specifically, loan servicing. This pandemic is continuing to create one of the most significant shocks to our economy that we've experienced since the financial crisis of 2007. It could be the worst. Consumers can request forbearance with simple attestation of up to one year on federally backed loans. Servicing rules change fast, and they have short implementation requirements. New remote online notary and remote ink notarization acceptance is available, digital workflows, customers, and processors are now requirements just to perform. When will the end of the allowable forbearance periods be required under the CARES Act? Will there be a wave of borrowers requiring post-forbearance? Today, I've invited Chris Zimmerman, a Product Manager with Wolters Kluwer. He specializes in servicing technology solutions, and he's going to provide us with some strategies for operationalizing servicing in a remote environment. This is a critical path in how to assist anyone in preparedness for the incoming flux of loss mitigation activities. Chris, tell us a little bit about the solutions work that you do for Wolters Kluwer and why they're so critical in today's environment.

Chris Zimmerman, Senior Technology Product Manager, Wolters Kluwer  02:21
Thanks for the opportunity to join in the discussion today, Samir. I'm currently a Product Manager for Wolters Kluwer’s Expere® solutions. Expere®, a centralized compliance document system that serves multiple lines of business, provides a complete set of tools for creating, managing, integrating, testing, and deploying documents. Expere® improves efficiencies with automated document selection to assembly and packaging.

Samir Agarwal, Vice President, Banking Compliance Solutions, Wolters Kluwer  02:45
With this incoming wave of forbearance, what's the background on the current state of affairs?

Chris Zimmerman, Senior Technology Product Manager, Wolters Kluwer  02:52
The forbearance numbers are ever-changing and published weekly through MBA survey data. The most recent trends show that the number of loans in forbearance has stabilized and started to decrease, but the overall volume remains unprecedented. As of July 20, MBA data estimated that roughly 3.9 million homeowners are now in forbearance. This estimate represents approximately eight percent of all mortgages. A look at the delinquency picture from Black Knights first look at June mortgage data shows that mortgage delinquencies improve for the first time since January, while serious delinquencies soar to a nine-year high.

Samir Agarwal, Vice President, Banking Compliance Solutions, Wolters Kluwer  03:28
What does serious mean?

Chris Zimmerman, Senior Technology Product Manager, Wolters Kluwer  03:29
Serious delinquencies are those loans that are 90 or more days past due. Again, according to Black Knight data, serious delinquencies rose by more than 1.2 million as the initial wave of borrowers financially impacted by COVID-19 missed their third mortgage payment. It's the highest level since early 2011.

Samir Agarwal, Vice President, Banking Compliance Solutions, Wolters Kluwer  03:48
Wow. So, that's definitely an important indicator. What else should we be looking at to get a full picture from the servicers lens of health?

Chris Zimmerman, Senior Technology Product Manager, Wolters Kluwer  03:57
The other thing we should look at is the federal foreclosure moratoriums in place. Active foreclosure inventory continues to decrease as well. June's 192,000 active foreclosures, according to Black Knight data, are the views on record dating back to 2000. Not surprising, there has been a sharp increase in the serious delinquency rate over the last couple of months. Depending on the outcome of post-forbearance loss mitigation reviews, there could be a long tail to this or an increase in foreclosure rates once moratoriums are lifted if borrowers don't qualify for a loss mitigation workout at the end of the forbearance periods.

Samir Agarwal, Vice President, Banking Compliance Solutions, Wolters Kluwer  04:32
All of this is going to be some pretty serious and substantial operational challenges. For those that are servicing loans, what are some of the biggest challenges currently affecting lenders?

Chris Zimmerman, Senior Technology Product Manager, Wolters Kluwer  04:46
Actually, Fannie Mae recently surveyed over 200 financial institutions to determine the areas presenting the most significant challenges due to COVID-19. The survey showed that the top servicer concerns included, number one, understanding and navigating post-forbearance relief options for distressed borrowers. Then secondly, gaining clarification on forbearance programs, followed by understanding and meeting evolving compliance requirements regarding mortgage customer relief, and then finally, concerns with the capacity and costs. These concerns are consistent with what we are hearing in the market. Compliance is always a concern, especially for those servicers that service loans for multiple investors, insurers, and have a servicing footprint in multiple states. The COVID-19 environment is also placing pressure on balance sheets, which we will discuss in more detail later.

Samir Agarwal, Vice President, Banking Compliance Solutions, Wolters Kluwer  05:36
Is there any advice on how we can make sure we know what we need to deal with on post-forbearance relief options?

Chris Zimmerman, Senior Technology Product Manager, Wolters Kluwer  05:44
Servicers will need to be prepared to navigate multiple investor insurer loss mitigation programs as the forbearance periods end. There have been recent changes to those investor insurers, waterfalls, and programs. It'll be critical that servicers navigate the available programs to place borrowers in the correct post-forbearance relief option.

Samir Agarwal, Vice President, Banking Compliance Solutions, Wolters Kluwer  06:03
What are some examples of those programs that you've seen?

Chris Zimmerman, Senior Technology Product Manager, Wolters Kluwer  06:06
In addition to operationalizing the requirements under the CARES Act, there have been changes to investor insurer programs, as I mentioned earlier, and they are often the most difficult to monitor for and implement our changes at the state level, which included state versions of the CARES Act. On May 13, the GSC announced the COVID-19 Payment Deferral Workout Option. This new workout option was specifically designed to help borrowers impacted by a hardship related to COVID-19. To return their mortgage to a current status after up to 12 months of missed payments. It was really designed to be a solution that is simple to explain to borrowers, as the amount of the delinquency moves into a non-interest bearing balance, which is due and payable at maturity or pay off with all other terms of the mortgage remaining unchanged. In addition, no trial period is required, resulting in fewer borrower touchpoints than required for a standard modification.

Samir Agarwal, Vice President, Banking Compliance Solutions, Wolters Kluwer  07:00
That's some pretty significant relief for borrowers. What other changes are taking place?

Chris Zimmerman, Senior Technology Product Manager, Wolters Kluwer  07:04
On July 8, the FHA also issued new variations to their COVID-19 Emergency Partial Claim options. Servicers are required to offer the expanded options no later than 90 days from the date of the mortgagee letter but may begin offering those new options immediately. So, I think really identifying those borrowers, potential borrower touchpoints and insurance consistency, and accuracy in communicating the correct relief option is going to be crucial. Ensuring those communications, both written and verbal, are consistent and compliant becomes even more challenging when it feels like the requirements are changing daily. It's really critical that servicers have sufficient monitoring processes to identify those regulatory changes, both at the federal and often more challenging state level. Once those regulatory changes are identified, servicers need to ensure that policies, process training, and borrower communications are updated accordingly. Servicers should also update their compliance management systems, have well documented and robust training programs, and sufficient controls in place to ensure compliance with these changing requirements.

Samir Agarwal, Vice President, Banking Compliance Solutions, Wolters Kluwer  08:10
We know that there will be a lot of change. There already has been a lot of change. There will be more change, and we need to constantly adapt the way that we're operating in this environment. What are the leading indicators from your perspective that you look at or that our servicers should be looking at when we think about the size of processing needs or how organizations need to adapt?

Chris Zimmerman, Senior Technology Product Manager, Wolters Kluwer  08:32
While we know there's a wave of volume coming, predicting the size and timing is difficult. With the recent rise in COVID-19 cases, there's really no comparable event like the industry is facing today. The underlying cause here is a health event. This downturn is different than the impact of the financial crisis in that there is time to prepare for the increase in delinquencies and defaults. The suddenness and magnitude of this event is presenting different challenges. One way servicers can gain insight is by looking at past disasters, such as the 2017 hurricanes in Florida and Texas. While people may have stopped working temporarily, most of those jobs didn't go away, except for Hurricane Katrina. Most of the downturns were short-lived and followed by a quick recovery. Past data is not perfect, but it is the closest data available to gain valuable perspective in this environment.

Samir Agarwal, Vice President, Banking Compliance Solutions, Wolters Kluwer  09:21
That's a great parallel, Chris, drawing it to weather because it feels like that. It feels like you never know, and there's a limited amount of forecasts that are available to us. Based on past data being more informative, that allows us to know what we can do once we understand what's happening. But is that reliable or is there something else that will also help us assist in some of the planning?

Chris Zimmerman, Senior Technology Product Manager, Wolters Kluwer  09:48
Certainly, Samir, one of the major challenges the industry is facing is tied to staffing. Past data can help servicers at least perform some level of capacity planning. There will need to be frequent monitoring of reporting and resource allocation, and servicers will need to be prepared to make necessary adjustments based on real-time data. Before COVID-19, servicers were staffed for a historically low delinquency default environment. With this event hitting the industry quickly, finding and hiring the volume of staff with the required skill set in time to address the post-forbearance weight is challenging. There were also staffing challenges at the onset of the CARES Acts to address significantly increased call volumes. Many services are finding it necessary to redeploy existing staff or outsource certain functions to reduce costs and augment recruiting efforts.

Samir Agarwal, Vice President, Banking Compliance Solutions, Wolters Kluwer  10:37
That makes a lot of sense. I was speaking to a lot of our lenders and that's exactly what they're doing. They're redeploying existing staff to do new jobs, and doing exactly what operators do, they adapt. You never know what the environment is going to bring, and there's always nuance to it. Tell me a little bit more about other things that lenders are doing or what does it do to cost?

Chris Zimmerman, Senior Technology Product Manager, Wolters Kluwer  11:00
From a cost perspective, the right to forbearance allowed under the CARES Act is placing pressure on balance sheets. Servicers are required under investor guidelines to still advance principal interest taxes and insurance on loans in forbearance. The GSEs did help reduce this pressure on balance sheets by capping servicers' obligation to advance principal interest, taxes, and insurance to four months. Ginnie Mae created the Pass-Through Assistance Program to cover principal and interest advances. However, servicers of Ginnie Mae-backed securities are still responsible for taxes, FHA insurance premiums, homeowners insurance, and Ginnie Mae’s six-basis-point guarantee fee. Compounding the issue for government loans is the fact that those loans are at a higher risk of default. As of July 20, six percent of GSE loans were in forbearance, while 10 percent of Ginnie Mae loans were in forbearance according to data from the MBA. The recent rise in COVID-19 cases will continue to pose liquidity challenges for servicers, especially for servicers of government loans.

Samir Agarwal, Vice President, Banking Compliance Solutions, Wolters Kluwer  12:01
That's a pretty big deal, Chris, because you're basically saying the cost is rising. And when the cost is rising, it's going to pose a lot of problems to the balance sheets and the ability to provide forbearance and to sustain forbearance in an operating institution. It draws my focus to technology. What I'm curious about is how does technology help us solve some of the cost issues? Sure, we have to spend to get to a better path, but will that have a long-term effect? Based on this not being weather, which is temporary, do you expect that firms will make an investment into technical solutions that will have long-term lasting effects?

Chris Zimmerman, Senior Technology Product Manager, Wolters Kluwer  12:40
From a technology and infrastructure perspective, many servicers continue to invest in technology that is scalable when delinquencies and defaults increase. The availability of self-service portals, allowing borrowers to send and receive documents, will serve the industry well. Those that invested in technology while delinquencies were low will be better suited for the upcoming post-forbearance volume. In addition, servicers continue to look for solutions to manage document compliance and handle the printing and mailing of borrower notices. Investors such as Fannie Mae, Freddie Mac already allow for electronic signatures and remote online notarization for surfacing documents, such as loan modification agreements.

Samir Agarwal, Vice President, Banking Compliance Solutions, Wolters Kluwer  13:21
There's something important that you're touching on. That means if originators and loan modification processing is allowing for remote closing or remote signature, it’ll speed the process up. Should that  ultimately mean less cost?

Chris Zimmerman, Senior Technology Product Manager, Wolters Kluwer  13:39
It should. Anything we can do to improve the efficiencies in the process and eliminate paper from the workflow is going to be something that can be looked at from a cost-saving perspective, especially with social distancing requirements in place due to the COVID-19 pandemic and the wave of post-forbearance workouts on the horizon. Servicers really have an opportunity to leverage electronic solutions to improve the borrower experience and reduce those costs we mentioned. Through borrower self-service portals, the industry is empowering the borrower, which ultimately improves the borrower experience for those facing financial hardship.

Samir Agarwal, Vice President, Banking Compliance Solutions, Wolters Kluwer  14:13
I want to touch on that in another question. But right now, basically, I think what I'm hearing you say is the focus needs to be on borrower-centric experiences that are digital in nature. Is that right?

Chris Zimmerman, Senior Technology Product Manager, Wolters Kluwer  14:28
That's correct, Samir, and I also think it's about borrower expectations at this point, too.

Samir Agarwal, Vice President, Banking Compliance Solutions, Wolters Kluwer  14:32
How does that relate to regulatory change in oversight?

Chris Zimmerman, Senior Technology Product Manager, Wolters Kluwer  14:35
Relative to regulatory change and oversight, one of the lessons learned during the financial crisis was that you can expect frequent changes, often with short implementation timelines. Implementing robust monitoring processes, along with effective controls and audit trails, is critical. Servicers need to make sure they have the proper oversight of third-party vendors as well. The regulatory scrutiny was intense during the financial crisis, and you can expect that it will be just as intense, if not more, with this event.

Samir Agarwal, Vice President, Banking Compliance Solutions, Wolters Kluwer  15:03
So, because we have more vendors providing this technology or more financial institutions using futuristic technology to accomplish the same task, it needs a proper oversight from not just regulatory, but also from a security standpoint?

Chris Zimmerman, Senior Technology Product Manager, Wolters Kluwer  15:19
That's correct. Oversight is kind of the name of the game in today's environment than something that came out of the regulatory actions during the housing crisis. So, if history tells us anything, we can certainly expect that regulatory agencies will be looking at audit processes and controls to see how you manage your third-party vendors and risk.

Samir Agarwal, Vice President, Banking Compliance Solutions, Wolters Kluwer  15:41
What can we expect from the advanced technology?

Chris Zimmerman, Senior Technology Product Manager, Wolters Kluwer  15:45
Many advances in processes and technology have certainly been made since the last crisis. As we know, delinquencies and defaults are cyclical in nature; there's certainly an upfront cost and ongoing costs for implementing technology. But, as you alluded to earlier, that spend gets you to a better path and provides longer-term benefits. Efficiencies gained from technology will result in longer-term cost savings. Then, in the context of compliance, the risk of non-compliance can greatly outweigh the cost to invest in technology. The pandemic is certainly an opportunity for the industry to apply lessons learned and be an advocate for the borrower in these challenging times.

Samir Agarwal, Vice President, Banking Compliance Solutions, Wolters Kluwer  16:22
It's look at the long view, right? If you were talking to a bank executive who's making a decision around a technology investment, especially for servicing or even on the origination side, there's a long, long view of return on investment, and it's going to be competitive and worthwhile to make that investment right now. Did I capture that right?

Chris Zimmerman, Senior Technology Product Manager, Wolters Kluwer  16:45
Certainly, Samir. Definitely the investments being made, and a lot of servicers had already learned that lesson from the housing crisis and regulatory scrutiny that came with that, have really been making that investment in technology. So, there certainly is a longer-term benefit to this, and you know, the industry needs to be thinking outside of the context of this small moment in time and think about the longer-term benefits, successfully from a cost and compliance perspective.

Samir Agarwal, Vice President, Banking Compliance Solutions, Wolters Kluwer  17:10
Let's think about that in terms of past experience and lessons learned. How do you feel the industry is better equipped now than it was in the past around managing the borrower experience? Should servicers be thinking about that themselves, or how does it also pertain to maybe customer experience for those borrowers?

Chris Zimmerman, Senior Technology Product Manager, Wolters Kluwer  17:28
As servicers navigate the road ahead, it is vital to be thinking about the customer experience. Borrowers are faced with unique and unexpected economic pressures as a result of COVID-19. The changes in economic pressures were unexpected, sudden, and impacted borrowers who are accustomed to being able to make their mortgage payments prior to the pandemic. From a borrower experience perspective, that's one of the things the industry's really been laser-focused on since the housing crisis; and I think as regulators do look back at how you performed, one of the aspects they are going to be looking at is how you treated the borrowers through this challenging time and event.

Samir Agarwal, Vice President, Banking Compliance Solutions, Wolters Kluwer  18:07
So, last crisis, it almost felt like it was more of choice where a deal went upside down and we had a large amount of borrowers’ kind of walking away from upside down deals. In this case, it's forced the same outcome, but how are we managing it better than the last time around?

Chris Zimmerman, Senior Technology Product Manager, Wolters Kluwer  18:26
There will be a combination of applying lessons learned along with technology and people playing a critical role. As I mentioned, there has been that focus on providing that customer experience. So, customer communications, both written and verbal, are at the core of the customer experience. It's really critical to know where your borrower touchpoints are and have consistent, transparent, and compliant borrower notices. Verbal communications are going to be crucial as we navigate through this environment.

Samir Agarwal, Vice President, Banking Compliance Solutions, Wolters Kluwer  18:54
So, customer journey is paramount. We need to know every facet of our customer journey so we can help them and ultimately help ourselves.

Chris Zimmerman, Senior Technology Product Manager, Wolters Kluwer  19:02
Absolutely. Borrower education on post-forbearance relief options and well-trained staff who can keep on top of changing requirements are needed to prevent borrower confusion. A useful tool for communicating with borrowers is through the utilization of scripts. Fannie and Freddie have scripts and numerous resources available on their servicing page that can be leveraged for GSE loans and programs. Fannie Mae also provides a self-assessment document for servicers to use to help evaluate whether they're COVID-19 responses are compliant with their contractual obligations and the Fannie Mae selling and servicing guides. If you haven't already done so, you should also be looking closely at your borrower complaints. Complaints will be an early indicator that there may be a breakdown or other issues in your communication process that you can remedy.

Samir Agarwal, Vice President, Banking Compliance Solutions, Wolters Kluwer  19:50
Are there any mandates from the GSEs on what we should be stating to borrowers?

Chris Zimmerman, Senior Technology Product Manager, Wolters Kluwer  19:59
There are mandates from the GSEs and it’s based on the servicing guidelines. So, a lot of the materials that are available on their website, including the scripts, are really tailored toward helping you and your staff navigate those investor/insurer waterfalls and programs. To make sure at the end of the day, you're really putting that borrower in the proper workout. So, what I would say, Samir, is they're really driven along the lines of investor requirements and especially taking into consideration the compliance around that.

Samir Agarwal, Vice President, Banking Compliance Solutions, Wolters Kluwer  20:31
If I were to self-evaluate my organization and how we're going to navigate the borrower experience, what are some of the questions that I should be asking my own personnel or my operations staff?

Chris Zimmerman, Senior Technology Product Manager, Wolters Kluwer  20:44
Some of those key questions you should really be asking internally to ensure you have the customer experience in mind, include things like where are my communication touchpoints with the borrower? Second, how do I better control the buyer experience? Are my borrower communications consistent and compliant? Do I have controls in place over borrower communication templates? How flexible and scalable is my technology when defaults increase, portfolio sizes grow, or new regulatory requirements need to be implemented? And then a couple other questions you should be asking yourself is how do I prevent our complaints, and then finally, how do we make the loss mitigation process more efficient? Those are some of the key questions that are a good starting point to ask yourself, your staff, or yourself internally to make sure you have that customer experience in mind.

Samir Agarwal, Vice President, Banking Compliance Solutions, Wolters Kluwer  21:32
Some pretty good information. I definitely think it touches on the right topics that get us to the root of managing costs and managing the experience for the right outcome. I believe a lot of our listeners will benefit from that as well. What about navigating modifications or even managing the portfolio? Where are the risks?

Chris Zimmerman, Senior Technology Product Manager, Wolters Kluwer  21:50
From a portfolio management perspective, it’s crucial to ensure that there are no delays. Know your borrower outreach to discuss the borrower's current financial situation and provide the appropriate extensions of forbearance plans or place borrowers in the correct post-forbearance relief option. It's a little bit more than offering them relief options, it's going to be critical that you put the borrower in the correct one based on their financial circumstances. The CARES Act requires up to an initial six-month forbearance period and allows up to 12 months of forbearance. Many servicers opted to provide forbearance increments at 90 days initially. So, with the initial wave of forbearance requests taking place in late March and April, there's some data to suggest that a portion of borrowers were able to exit forbearance and were able to maintain their ongoing monthly mortgage payments. However, many borrowers require an extension of their forbearance periods. So, from a risk perspective, it'll be important to have controls in place to track and monitor those loans and forbearance. Executive reporting should enhance call center training reporting, including pipeline and forbearance plan dashboard reporting, to identify COVID-19 inquiries, starts, extensions and resolutions. In addition, COVID-19 forbearance plan monitoring and reporting should include the customer region or geographical location. These were all recommendations that came out of the self-assessment that Fannie Mae makes available. While not specifically a requirement, they are best practice recommendations that the industry should closely look at and follow.

Samir Agarwal, Vice President, Banking Compliance Solutions, Wolters Kluwer  23:27
Is that data readily available for anyone to look at?

Chris Zimmerman, Senior Technology Product Manager, Wolters Kluwer  23:30
It is actually at the servicing landing page for Fannie Mae. There's a whole section on COVID-19 resources and that information can all be found there.

Samir Agarwal, Vice President, Banking Compliance Solutions, Wolters Kluwer  23:41
Has there been anything to note, or has it been exactly as you would expect based on lending in the United States today?

Chris Zimmerman, Senior Technology Product Manager, Wolters Kluwer  23:49
I don't think there's anything unexpected other than, as we mentioned before, it's kind of an evolving situation and those requirements are changing rapidly. So, making sure that you do have properly trained staff, technology, and controls will be critical. Also, with those frequently changing requirements, an independent quality control review should be embedded within the decisioning and approval process.

Samir Agarwal, Vice President, Banking Compliance Solutions, Wolters Kluwer  24:16
What else do we know?

Chris Zimmerman, Senior Technology Product Manager, Wolters Kluwer  24:18
As a precursor to what's to come on July 16, the CFPB hosted a webinar outlining the bureau's supervisory and enforcement priorities as a result of the pandemic. Not surprisingly, the bureau plans to focus on areas where consumers are having trouble making loan payments, in the markets where Congress approves special borrower protections under the CARES Act. The CFPB also plans to assess financial institutions' implementation of the Paycheck Protection Program for fair lending compliance. The CFPB has deprioritized much of this existing exam schedule to conduct what they're calling “prioritized assessments.” The prioritized assessments will be narrower than a standard exam in timeframe and scope. The CFPB is using consumer complaints and news reports to prioritize and then identify institutions for prioritized assessments. The CFPB has put financial institutions on notice. Servicers should ensure they have well-documented policies, procedures, and controls to demonstrate compliance in preparation for upcoming exam cycles.

Samir Agarwal, Vice President, Banking Compliance Solutions, Wolters Kluwer  25:20
Understood. I think that's a pretty serious thing that we need to look at, even though the exams will be thinner, that they're still going to be just as thorough. Let's switch gears a little bit here, Chris. Let's talk about how we operate in a socially distant space. We have branches that are closing, and the mechanics of how we do our business is changing. So, what impact does that have on exchanging documents obtaining signatures? Are there other third-party tools that work really well, or what have you been hearing in the industry on how to operate more cost-effectively in this environment?

Chris Zimmerman, Senior Technology Product Manager, Wolters Kluwer  25:56
Today's pandemic environment should really move the servicing industry more quickly toward the digital experience. We definitely know through conversations in the market and trending that this is something that the industry, especially on the servicing side, is looking to implement. Historically, the servicing industry has been buying other lines of business, such as origination, when it comes to adopting digital solutions. The standards in the origination space can serve as the foundation as servicing moves more toward that full digital experience. Looking to streamline the delivery and execution of servicing documents, servicers are increasingly adopting digital solutions to electronically route, execute, and store servicing documents. In today's age, adopting e-delivery solutions in combination with a self-service portal can drastically improve the borrower experience. Servicers will continue to look to leverage these capabilities for loss mitigation and disaster relief programs to reduce timelines, streamline processes, and reduce costs.

Samir Agarwal, Vice President, Banking Compliance Solutions, Wolters Kluwer  27:00
Do you foresee any of the retention rules changing because we'll have digitization of the files and records of the transactions?

Chris Zimmerman, Senior Technology Product Manager, Wolters Kluwer  27:09
Yes, Samir. I would definitely say that one of the things servicers need to be thinking about is the retention of those electronic documents in the event that you have to enforce the note or foreclosure action, for example. That's certainly where the retention period could come into play and be expanded because you never know at what point of the borrower may default, may need to enforce that obligation, which would require that documentation be available.

Samir Agarwal, Vice President, Banking Compliance Solutions, Wolters Kluwer  27:36
There's a lot to consider with all these changes, and it seems like we're headed in the direction where the record will be preserved for a very long time. It's logical, rational, but then burdensome at the same time. How do you view the industry's stance today, and what are the lasting, long-term effects that we should expect from coming out of this particular situation?

Chris Zimmerman, Senior Technology Product Manager, Wolters Kluwer  28:00
As the servicing industry continues to look to improve the borrower experience through digital technology solutions, consideration must be made to ensure one is aligned with any compliance requirements that may dictate how notices must be delivered to borrowers. Moving toward the digital experience, servicing will greatly improve the borrower experience in the current pandemic environment. As more states continue to adopt electronic and remote online notary capabilities, servicers will have an even greater opportunity to leverage e-sign capabilities that are currently allowed under various investor insurer loan modification programs. As of July, 26 states have enacted legislation specifically authorizing remote online notarization as an acceptable method of notarization. As a result of COVID-19, many remaining states continue to quickly pass different forms of what is being referred to as remote ink notarization, that does not clearly meet the minimum standards of remote online notarization required for real estate transactions. In response, on July 1, the MBA announced that in partnership with the American Land Title Association, and the National Association of Realtors, a model executive order had been developed to assist remaining states and to enable remote notarizations during the COVID-19 pandemic. As a result, when looking for the right solution, servicers should make sure it's for the long run, with one eye toward accounting for an evolving regulatory environment and another toward making sure your processes continue to be compliant and friendly from a borrower experience standpoint.

Samir Agarwal, Vice President, Banking Compliance Solutions, Wolters Kluwer  29:34
Let's relate some of these solutions to the work that you're doing with Wolters Kluwer. Tell me some more about what you're doing today to help servicers during this time?

Chris Zimmerman, Senior Technology Product Manager, Wolters Kluwer  29:43
Samir, let's start with the last thing we discussed. Wolters Kluwer does have a solution to help facilitate electronic signatures. In addition, we also offer an Expere® servicing solution, which includes compliant documents needed to support the investor insurer loss mitigation programs, as well as documents needed for the pre-foreclosure process. In addition to compliant documents, we also support printing and mailing services. Wolters Kluwer is also helping servicers through our consulting services, Fair Lending Wiz and OneSumX for Regulatory Change Management products.

Samir Agarwal, Vice President, Banking Compliance Solutions, Wolters Kluwer  30:16
Awesome. So, I'm going to pull a string out of there a little bit more. What if I don't know what I need as a lender or as a servicer? Does Wolters Kluwer offer a health checkup?

Chris Zimmerman, Senior Technology Product Manager, Wolters Kluwer  30:27
Certainly. Through our consulting services, we have a whole variety of different options and services available from a consulting perspective. We're able to accommodate any need that a servicer may have. If there's help needed, certainly, one of our solutions is there to assist.

Samir Agarwal, Vice President, Banking Compliance Solutions, Wolters Kluwer  30:45
Chris, it's been a pleasure speaking with you today. I think we've provided our listeners with some excellent information on how to work through forbearance and the typical servicing gotchas and focus points during this difficult time. Thank you for coming on today. I really appreciate your insights and look forward to speaking with you again.

Chris Zimmerman, Senior Technology Product Manager, Wolters Kluwer  31:04
Great. Thanks, Samir. It was a pleasure joining you today as well. Thanks for the opportunity to talk about this important topic.

Greg Corombos, News Director at Radio America  31:10
That's Wolters Kluwer’s Vice President of Banking Compliance Solutions, Samir Agarwal, joined by Chris Zimmerman, Senior Technology Product Manager with Wolters Kluwer. Wolters Kluwer is the host of this podcast. Wolters Kluwer is a market-leading provider of advisory services and technology solutions for optimizing compliance programs. For more information and additional guidance, please visit WoltersKluwer.com or call 1-800-397-2341 and press the number one. Please join us for future podcasts focused on navigating regulatory compliance.