Fitch: RMBS Servicers Focus on Post-Pandemic Performance

Fitch Ratings, New York, said mortgage servicers are anticipating increased regulatory scrutiny in 2023 as borrowers continue to exit forbearance assistance plans and seek help with their mortgage payments.

In a special report with key takeaways from its seventh annual U.S. RMBS Servicer Roundtable, Fitch noted servicers report mortgage-related consumer litigation remains minimal due to available assistance programs and low foreclosure volume. Attendees reported that call center volumes are largely back to pre-pandemic levels, indicating that the industry has truly emerged from the pandemic era.

Servicers may still face significant challenges in 2023, Fitch said. “Consumer litigation such as contested foreclosures and increased regulatory scrutiny could stress servicers as delinquencies increase,” the report said. “The wind-down of foreclosure and eviction moratoriums and the potential impact to RMBS performance remains a key focus for investors, servicers and issuers.”

The CARES Act provisions ended in late 2022, but additional forbearance relief was extended through early 2023. Participants in a Fitch roundtable reported several hundred new requests for forbearance plans under the extension per month, “which is significant but not close to peak pandemic levels,” the report said. Borrowers who will face economic distress once the extension concludes remains uncertain.

Participants also discussed new self-service technologies to automate processes and repetitive tasks to reduce cost and the risk of human error. Servicers highlighted the importance of swiftly adapting to changing market conditions and client needs. Participants predicted that there will be more merger and acquisition activity in servicing in 2023 and that larger servicers will reduce their footprint through natural attrition.