For the first time in a year, the number of mortgage loan modifications is growing, according to FHFA.

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Although the average borrower who has paused payments due to the pandemic most often chooses renew their original obligations and pay the amounts due laterthe number of requests to change the loan term due to availability reasons increased for the first time in a year.

The Federal Housing Finance Agency said on Tuesday that 11,434 loan changes were made in the first quarter, representing 130,014 deferred payments, up from 9,347 and 185,112 (respectively) in the previous fiscal period. The number of modifications has not been that high since the first quarter of 2020, when there were 16,773.

This suggests that while loan modifications are still progressing well below normal rates, they are starting to gradually increase the mortgage service workload. An appraisal process, similar to determining the income required for a new loan, is required for making changes, but not for deferrals.

“The deferral returns the existing payment to the borrower, and … it is much easier to do online than a mod that requires the underwriting of a loan,” Matt Tully, director of compliance and head of agency affairs at service technology firm Sagent, said in an email …

While mortgage services, which usually pay borrowers, have been able to manage their workload to date using a combination of employee cross-training and automationThis is partly because foreclosure staff have more time left by temporary government bans, Tully said.

“To cope with the influx of deferrals and modifications, some of our serving clients have relocated staff who would have traditionally dealt with foreclosures – currently unable to do this work due to the moratorium – to focus them on working with borrowers on retention options,” – he said.

When the government lifts foreclosure and abstinence prohibitions, service organizations may need to consider additional technology use or hiring. However, they are reluctant to invest prematurely due to repeated extensions of the moratorium and decrease in the rates of suspension of payments. The suspension of payments, known as abstinence, currently accounts for less than half of housing retention activities by the two government agencies that FHFA oversees, Tully said. At the time of publication, the two agencies that serve low- and middle-income borrowers should have end foreclosure ban at the end of this month, and had a particularly low abstinence rate compared to the market as a whole – just over 4%.

“This will all be interesting … if the foreclosure moratorium really expires,” said Richard Koss, chief scientist at mortgage analyst Recursion. “That’s when you really know what’s going to happen.”



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