In late November 2020, dictionary publisher Merriam-Webster announced that their annual Word of the Year was “pandemic”, based on statistics of words searched through the online version of their dictionary. According to the publisher’s blog post of the announcement, search for the word “pandemic” began increasing in January 2020 but increased 1,621% over the previous year on February 3 when the first COVID-19 patient in the U.S. left a Seattle hospital.

While the public might have had an idea that something was happening, nobody’s Magic 8-ball, Ouija board, crystal ball or any other prediction device could have foreseen what was to come, especially in the mortgage servicing industry. The moratorium on foreclosures and evictions enacted by the Federal Housing Finance Agency on March 18, originally scheduled to last for 60 days but ultimately extending into 2021, triggered an emergency brake that forced many firms and businesses to grind to a halt.

While the ability to predict the future still is not an exact science, USFN member firms were asked to give their opinion on what 2021 holds for the industry. Like any prognostication, these views are not meant to be etched in stone, but rather used as a general view of where things might be headed.

Due to the current political and social climate, firms were given the option to remain anonymous. The authors' predictions are their views and may or may not represent those of their firms. 

The Orlans Team
As we look into our 2021 crystal ball, the Orlans team sees a mixed bag but certainly better than the pain and emotional toll of 2020. We see further extension of the moratoria followed by ramp-up strains and court delays. We see loss mitigation efforts that really help people, an increase in bankruptcy filings, and a renewed focus from the CFPB. We see continuation of low rates and refis before they drop off. Managing the population of borrowers in forbearance programs will be critical to the housing market.

In 2021, law firms representing clients in the real estate industry will be challenged to provide more value, more efficiently. Clients will need more business intelligence and local perspective as the impact of the pandemic affects markets differently. 2021 will also present an opportunity for productive dialogue with local elected officials and the judiciary about our industry.

The challenges of 2020 forced innovation, resiliency, and adaptability – and the companies that rose to these challenges will be better positioned for 2021. We were inspired by ingenuity in 2020 and hope to see some of the pandemic pivots continue – like workplace flexibility and the ability to work from home, virtual court appearances, greater use of eNotes, and acceptance of remote closings using RON (remote online notary). Other things we would like to see continued include better hand washing, cleaner airplanes, virtual happy hours, and to-go cocktails.

We especially look forward to sustained and meaningful improvement in workplace diversity. We hope the Black Lives Matter movement inspires more people to learn and listen, to value differences and reserve judgment. We at Orlans have started with ourselves - to raise awareness about our own biases, to do something different tomorrow to make this world better for all people, and to spread a message of equality and inclusion.

We look forward to seeing all of you in person in 2021!

Anonymous
Before welcoming 2021, we say good riddance to 2020. A year that destroyed best laid plans, left us on the ground rather than in the air, and slowed us to a crawl, we cannot say goodbye fast enough. How do we tackle a plan to thrive in 2021? This must be the year of implementing precise budgets, opening communication, and thinking outside the box.

Law firms must continue to operate on shoestring budgets. This includes reduced staff, reduced pay, nominal “above and beyond” flair and expectations of staff performing additional functions. Less pay for more work does not make happy employees. With the holiday season upon us, raises and bonuses may have to wait until “Christmas in July”. Will our employees remain with us until that time or look elsewhere for a more stable environment?

If 2020 has taught us any critical lessons, it is that better communication must be developed. Law firms have lost long time staff, who had knowledge and experience which cannot be gained in two weeks of training. It will take months to years to gain the experience needed to function at high levels. Law firms cannot afford to hire staff and start training until we know when the work will flow; and then, wait for payment. If state and GSE moratoriums extend through second quarter 2021 without a second CARES bailout, many firms will not survive. Open communication is half the battle for implementing accurate planning.

Thinking outside the box, GSEs and servicers need to advise firms immediately upon learning of extensions of moratoriums or direction to prepare for incoming high-volume referrals. Servicers should conduct attorney summits to discuss plans of actions to resume foreclosures, jointly setting expectations. GSEs need to extend their deadlines and penalties. No scorecards in 2021. The current “designated” attorney structure of FNMA and FHLMC diluted the strength of firms and needs to be re-assessed. GSEs and servicers must provide a reasonable fee for prepping files that are on a “hold” status; pay firms for work performed now. Evictions should be paid in milestones. Servicers must commit to 30-day payment with GSEs providing servicers with a fast pay credit. Increase attorney fees for processing loans within reasonable timeframes so firms can pay overtime or hirer experienced staff. It is time for GSEs who have not increased attorney fees to do so now. Hourly fees must be set jurisdictionally to match local inflation.

To make 2021 the year to succeed, law firms need life-saving assistance to be implemented, changing our industry for the better.

Victor Kang, Rubin Lublin, LLC
As we near the end of 2020, the mortgage default industry is starting to turn its eyes towards the next year and what the future may hold. This past year introduced new phrases and concepts to the workplace like “social distancing,” “zoom calling” and virtual or remote-anything have become the norm. And, so too has describing everything 2020 as being “unprecedented” and “once-in-a-generation”. In short, there is no reliable predictor for what the next year may hold, but I will take a stab at what 2021 might mean for the mortgage default industry.

As I draft this article in the middle of December 2020, the United States is delivering the first COVID-19 vaccines to its citizens. A Gallup Poll was also released in December 2020 showing that 63% polled in the US would take a COVID-19 vaccine – an increase from only 50% willing to take a vaccine just 3 months earlier. By the time you read this article, vaccination distribution in the US will have already begun. Politically, a transition from the Trump administration to Biden’s is slowly taking place, with our home state of Georgia taking center stage with 2 U.S. Senate runoffs that could sway the balance of power in Washington DC. Should the Democrats flip both seats, the split in the Senate would be 50-50, with Vice President-Elect Harris casting deciding votes. Nevertheless, such a slim majority is not likely to provide the Biden administration with carte blanche to rewrite 4 years of Trump policy. Therefore, there will be plenty of negotiating and compromising going on in Washington DC, especially as it relates to housing policy, especially as it relates to a bailout of the servicing industry, aid to the small businesses that make up our industry, and extensions of moratoria on foreclosures and evictions. Biden’s recent nomination of Janet Yellen for Secretary of Treasury has been generally well received. Yellen who chaired the Federal Reserve during the aftermath of the Great Recession of 2008, is seen as being far more moderate than many of the candidates for the position who were supported by the far left.

The question that everyone in our industry has on their mind is when will things return to normal. So much of that depends on when the foreclosure and eviction moratoria will end for good. With COVID raging out of control currently and the holiday season upon us, FHFA has now extended the moratorium on foreclosing federally backed mortgages to January 31, 2021 and HUD extended their moratorium to end of February 2021. As to evictions, the CDC Order barring evictions is set to expire in just a couple of weeks on December 31, 2020. I fully expect that the CDC or Congress will extend that bar on evictions out to January 31, 2021 or beyond very shortly. Beyond the federal regulations and legislation, many states have also implemented their own moratoriums or measures aimed at our industry.

With these critical issues of housing policy effectively punted to the Biden administration, the question then becomes what a Biden administration will do with respect to foreclosures and evictions. On the origination side, Biden will inherit an extremely healthy housing market. Mortgage interest rates are at historically low levels. Home values and, correspondingly, home equities have remained high. Sales of new and existing homes are robust. This, coupled with the emergence of widespread vaccination against COVID, should lead to a more shorter-term solution for foreclosure and eviction moratoria. Could Biden seek legislation that extends moratoria beyond just federally backed loans? The answer to that is yes. However, I do not see it as likely since the current moratoria seems to be achieving the stated goals without much public backlash. In any event, my bet is that, barring a major and continuing outbreak of COVID leading to lockdowns that would extend into late January and February 2021, all moratoria would be allowed to expire by the end of April 2021 or June 2021 at the very latest. Thus, things would start to return to normal in Q3 of 2021. While nobody is wanting to see homeowners affected by COVID foreclosed or evicted, the reality may be that Q4 of 2021 might become terribly busy in the world of mortgage default and all sides of the industry should be prepared to be fully staffed to tackle the backlog of defaulted mortgage inventory.

McCalla Raymer Leibert Pierce, LLC
It was the third Tuesday of the month, February 18, 2020, when I first heard about a virus in China.  It was completely random.  Our CIO was updating our firm’s executive management team on the myriad of IT projects we had in process.  He was completing his presentation with an update on our data center refresh, including, “…we have removed our 4 HP VMware Hosts, Equallogic and Nimble SANS; DR/BCP in progress…etc.” Admittedly, at my sharpest, I can barely make sense of these monthly IT updates, but on this day, I was further impaired by daydreaming about my kid’s spring break only weeks away.  Then, like a lightning bolt on a clear day, our CIO said, ”…there is a virus in China that could impact our firm, so we are reviewing our pandemic recovery plan.”  Silence.

From the Oval Office on March 11 President Donald Trump said, “My fellow Americans, Tonight I want to speak with you about our nation’s unprecedented response to the coronavirus outbreak that started in China and is now spreading throughout the world.”  That same day, the Director General of the World Health Organization declared COVID-19 a pandemic.  Two days later, on March 13, President Trump declared COVID-19 a national emergency, and issued a travel ban on non-Americans who visited 26 European countries.  On March 18, FHFA and HUD announced a foreclosure and eviction moratorium on federally back loans.  And, on March 26, the Senate passed the Coronavirus Aid, Relief, and Economic Security (CARES) Act, which included a “prohibition” from initiating “any” foreclosure or eviction actions on federally backed mortgage loans. President Trump signed the CARES Act into law the following day.  (Recently, FHFA and HUD announced its third extension to its foreclosure and eviction moratorium through Jan 2021).  

As an owner of a large default law firm, in my deepest, darkest, delves of insecurities I could not have dreamt this nightmare scenario.  If you would have told me in Jan 2020, that there would be a global pandemic resulting in a 50-state suspension of foreclosures and evictions for 266 days (and counting) I would have asked, “If you wanted to buy a default law firm… cheap?”  Moreover, I would have predicted at least 50% of the default law firms would be out of business.  As it turns out, I would have been wrong, so I am not sure how much stock you should put in my prognostications for 2021.

Q - 1

• President Biden will announce the fourth extension to the foreclosure and eviction moratorium through March 2021
  
  
• Non-bank servicers will allow the remainder of its “vacant and abandoned” properties to proceed to foreclosure and eviction
  
  
• Non-federally backed loans, often called “private label loans”, will reemerge in the default cycle, including the more cautious non-bank servicers and some large banks
  
  
• Servicers and law firms will begin bringing employees back to the office, and campaign to bring back either furloughed employees or employees reassigned to other departments during the moratorium.
  
  
• FHFA, HUD & VA will announce its borrower forbearance program through 2021, with some tightening of the qualifying standards.
  
  

 Q – 2

• Servicers and law firms will have staffing capacity in place to handle the surge in volume.
  
  
• FHFA and HUD will announce the fifth extension to its foreclosure and eviction moratorium through May 2021.
  
  
• CFPB will announce a 30-day “cooling-off” period allowing the moratoriums to end June 30, 2021.
  
  
• Servicers will launch a massive loss mitigation initiative to reintroduce the millions of borrowers on forbearance back into the normal servicing stream.
  
  
• Approximately a third of borrowers who relied on long term forbearance will end in default.
  
  
• Due to historic low interest rates, the real estate market will remain stable while absorbing the backlog of REO properties.

Q – 3 & Q – 4

• A sufficient percentage of the US population will either have received the COVID vaccine(s) or achieved antibodies by contracting COVID-19 to allow for herd immunity.
  
  
• The mortgage default industry will experience a surge in volume, especially Q – 4, as it continues to absorb the remainder of the backlog caused by COVID in 2020; and
  
  
• For the first time in 22 months, both servicers and law firms will return to semi-normal business planning for 2022.
  

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Winter 2021 USFN Report