SFA PLS Servicing Reporting Package Under COVID-19

SFA convened issuers, servicers, investors, rating agencies, data and analytics firms, and industry stakeholders to discuss PLS servicing reporting during the COVID-19 pandemic.

Overview of SFA’s Work on Loan Level Servicing Reporting During COVID-19

The COVID-19 pandemic represented not only a global health crisis, but also created an unprecedented financial burden for millions of Americans. While the CARES Act and various administrative actions mandated uniform, one-size-fits-all payment relief option to borrowers with government-backed mortgages, borrowers with privately-owned PLS mortgages continued to have a variety of payment relief options. This diversity of payment relief plans provided to borrowers has, in some instances, resulted in the need to establish a comparable standards in how COVID forbearance and deferrals are reported. The lack of standardized reporting for COVID-related forbearance and deferrals has been raised by PLS investors who provide the financing for such loans, as well as many of the transaction parties across the market, including trustees, servicers, master servicers, bond administrators, rating agencies, and data and analytic providers involved in these transactions.

After conducting outreach to PLS servicers and receiving input from PLS investors and other industry stakeholders, SFA convened a PLS servicing reporting roundtable on October 26, 2020 to address questions that had been raised on the reporting of loans in forbearance and deferral during COVID-19. These issues include:

• How to report modifications and forbearances in a consistent and comparable when different servicers have varying relief options available to borrowers
• Whether a forbearance with a modification component is reported as a modification, forbearance, or deferral
• How to distinguish in servicer reports when a borrower receiving some form of payment relief continues to make payments vs. when the servicer is advancing payment on behalf of the borrower

Since that PLS Servicing Reporting Roundtable, SFA has continued to work with investors, servicers, master servicers, trustees, and other stakeholders to address these issues in a way that provides clarity to investor and other market participants, that is also operationally achievable for servicers, that supplements existing reporting and is made available in a manner similar to existing reporting procedures from trustees, master servicers, and bond administrators, and that does not interfere with a borrower’s ability to avail themselves of the payment assistance programs available to them.  We are pleased to present for the industry the following materials:

• COVID Servicing Data Fields: A table developed by servicers and master servicers—with input from investors—that includes data points for loans receiving a forbearance or deferral during COVID-19
• COVID Servicing Reporting Mock-Up: A sample report that illustrates how servicers—using the COVID Servicing Data Fields worksheet—would report different scenarios for a borrower who is on some form of payment plan

As this is an iterative process, SFA may in the future publish additional materials or update existing materials, with master servicers developing such materials in response to feedback received from investors and other transaction parties. While we believe these materials and this initiative will benefit the industry by providing additional clarity through supplemental PLS servicing reporting, stakeholders should be aware of limitations that exist. Such limitations include:

• Adoption of such reporting is voluntary, and may vary from party to party
• Master servicers will not report such information if all servicers in a securitization transaction do not report it to them
• Trustees will only make the supplemental report available to the degree it is made available to them by the master servicer and/or servicer
• Master servicers, trustees, and bond administrators are not verifying or attesting to the accuracy of the information in the COVID-19 supplemental reports, nor are they cross-referencing the information in the COVID servicing reports with information provided in any other reports
• Reporting may evolve based on the types of relief offered and performance of loans covered by such programs

With this background, SFA believes that these materials—combined with the interest shown from across the market on this topic—can help provide additional clarity and transparency for investors, servicers, and all transaction parties of PLS mortgages reporting during COVID-19.

Disclaimer

The release of these materials by SFA does not mean or imply that any or all of the supplemental reporting information discussed herein have been adopted or endorsed by any specific SFA member; does not create any legal obligation of any specific SFA member; does not create any legal rights of any person; does not constitute any statement as to materiality of any matter for any purpose; does not constitute legal advice; and is not intended to express any opinion or interpretation as to any contractual obligations. SFA members are neither required to subscribe to, nor obligated to adopt, any of the suggestion or practices outlined herein.