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Limiting Mortgage Servicing Risk in Turbulent Times
August 31, 2020
Source: DS News
The Wall Street Journal (Before Making Loans, Some Mortgage Lenders Ask, Do You Really Plan to Pay This?)
To help anticipate and contain losses in the shadow of the pandemic and the ongoing economic fallout, the Wall Street Journal reports that some homebuyers are being asked upfront if they anticipate any income-related changes or whether they plan to seek out a forbearance plan.
The prerequisite is in the form of a new document included in the closing paperwork for some borrowers. According to forms reviewed by the Journal, the forms—known as “COVID-19 borrower certifications”—often ask homebuyers to confirm changes to their income aren’t anticipated and outline potential penalties that could apply if any of the certifications are later proven inaccurate.
The form additions could help services better anticipate and mitigate against risk inherent in lending during a concurrent health and economic crises. As the WSJ story reports, “the current recession has made it particularly hard to determine who is creditworthy: Millions of Americans are behind on their debts, but their missed payments aren’t reflected in their credit scores or uniformly recorded on their credit reports because of protections in the stimulus law.”