The coronavirus pandemic has created a new definition for unprecedented times. This has been a forced change for all of us. If you are part of the real estate ecosystem—renter, buyer, seller or service provider— you are probably wondering, “What does this mean for me?”
Like the 2008 financial crisis, this pandemic is creating issues for consumers who are experiencing financial distress, job loss, income loss, and uncertainty about the future. The economic stimulus package (CARES Act) promises to provide some relief, but experts agree that its economic impacts will remain unclear for some time. Leveraging our deep experience in the mortgage industry, in this article we share what the fallout means for consumers in the short term and what it may mean for lenders in the longer term.
Coronavirus’ impact on the consumer
Consumers have some financial relief options right now. Although still evolving, the policies around forbearance and loan modifications are designed to provide borrowers and renters needed payment relief so they can stay in their homes if they’ve encountered hardship as a result of coronavirus.
The stimulus package does not cover all borrowers, however, just those whose loans are owned by Fannie Mae, Freddie Mac and FHA. Although these three organizations represent about 60% of all mortgages, that still leaves a great number of borrowers who will not be covered by the stimulus. If you are unclear who owns your loan, you can check the Fannie Mae or Freddie Mac websites to determine. At the encouragement of the government, all lenders have been asked to allow some kind of forbearance for those impacted by job or income loss.
For home buyers, the real estate market is still functioning amidst the pandemic. Rates are still at historic lows, but obviously economic uncertainty is causing some to delay jumping into the market. Realtors are scheduling virtual showings for homes on the market, and Fannie Mae and Freddie Mac have issued specific guidelines on how to appraise homes without the ability to access the property. To date, 23 states have authorized e-signature and remote online notarization (RON) for closing and authorization.
Coronavirus’ impact on lenders
For lenders and the lending community, communication and process transformation are key. The pandemic crisis has made customer experience more critical than ever. Most financial organizations have responded by setting up helplines via chat bots, call centers, or online forms to respond to customers frantically seeking answers during these trying times. Since the situation is so mercurial, lenders struggle to provide answers to every question. But at the very least customers deserve simple acknowledgment that their questions have been heard and, even if you don’t have all the answers yet, you’re pursuing them. Set expectations that processes may change because of the current situation. Above all, empathy and transparency will help build the customer experience and relationship.
Social distancing has increased the need for contactless authorizations and e-closing, and borrowers are more open to trying digital platforms and solutions. Now is the time to transform your processes and make available e-signatures, e-closing, and more digital services like property valuation alternatives and remote online notarization. Streamlining your business processes to become more efficient will help improve employee experience and meet the new customer demands that are surfacing in this unprecedented time.
With challenge comes opportunity
Even in the midst of all this chaos and forced change, not all is bad. Buyers, sellers and lenders are finding creative and sustainable ways to support the home purchase and selling process. Since traditional methods aren’t necessarily practical or available, these creative approaches are gaining traction. Having agents streaming live shots of home tours and modifying purchase agreements to include greater flexibility in closing times are just a couple of the ways the industry is responding to current circumstances. In addition, lenders are relying on digital channels to engage buyers in the borrowing process. Relaxed guidelines around employment verification, appraisals and document signing are making loans easier to settle. And quicker adoption of e-closing and RON are rapidly increasing the number of mortgages that are strictly digital.
All these changes are paving the way for a future of homebuying and mortgage lending that will be far more streamlined, digital, and consumer centric. To learn more about the digital revolution that is accompanying recent changes in the homebuying ecosystem, check out Part 1 and Part 2 of our digital mortgage series.