Forbearance on request: what the CARES Act asked of loan servicers

The week

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law after passing Congress that week. Section 4022 gave borrowers with federally backed single-family mortgages who faced pandemic-related hardship the right to request forbearance of up to 180 days, with a possible extension of up to another 180 days. It also placed a temporary moratorium on foreclosures for those loans. Section 4021 amended the Fair Credit Reporting Act. In general, a lender granting an accommodation to a consumer affected by the pandemic had to report the account as current if it had been current before. Federal housing agencies and the government-sponsored enterprises had announced foreclosure pauses in the preceding days.

For banks, credit unions and mortgage servicers, the CARES Act turned a back-office exception process into a high-volume customer service. Forbearance had always existed, but it was usually negotiated case by case, with documentation. For federally backed mortgages, the Act made it available on request with an attestation of hardship. That created three distinct customer experience problems: taking requests at scale, reporting accommodated accounts accurately, and preparing borrowers for the end of forbearance. Each depended on systems and content decisions made long before March 2020.

Taking requests at scale

Servicing call centers were sized for a steady flow of hardship requests, not a surge. Many borrowers called within days of the law passing, often while call center staff were themselves moving to remote work. Hold times grew. Online request forms, where they existed, were built to collect documents rather than to record a simple attestation.

The firms that coped best moved the request itself to digital self-service. A short form captured the attestation, the loan, the requested term and the borrower’s contact preferences, then returned a confirmation with the start and end dates. That reduced call volume and created an audit trail. It also raised a design question. The form had to make forbearance easy to request without implying that borrowers who could keep paying should stop, since paused payments would still be owed.

Loans that were not federally backed added complexity. Portfolio loans, home equity lines and loans held by private investors fell outside Section 4022. Many lenders offered similar relief voluntarily or under investor guidelines, on different terms. Intake therefore needed routing logic: identify the loan’s investor or guarantor, apply the matching policy, and explain clearly why relief differed between two loans held by the same household. Agents needed a single screen that showed which rules applied, or they would give inconsistent answers.

Remote work changed the control environment for intake. Agents handling calls from home were reading account details aloud, sometimes on personal phones, and recording requests in systems they normally reached from a secure floor. Call recording, quality monitoring and supervisor escalation all had to work over home connections. Servicers that could not record remote calls lost the evidence they would later need to show what a borrower had been offered. Quality teams that sampled remote calls weekly caught script drift early, before it reached thousands of borrowers.

Reporting accommodated accounts correctly

Section 4021 reached beyond mortgages, to accommodations for consumers affected by the pandemic across credit products. Lenders and servicers that furnished data to credit bureaus had to report accommodated accounts as the law required. That depended on status codes in servicing platforms, and on coordination between the team granting accommodations and the one producing the monthly credit reporting file.

Errors harm consumers directly and invite complaints and supervisory attention. The core control is a reconciliation, run every reporting cycle, between the accommodation records and the data actually furnished. Exceptions go to a named owner with a deadline. Many institutions found that accommodation records lived in different systems from the credit reporting logic. Some lived in spreadsheets kept by the team that took the calls. Bringing them into the system of record was dull work, and it was the only way to make the reconciliation reliable.

Disputes needed the same discipline. Borrowers who saw a late payment reported during forbearance would dispute it with the bureaus. Dispute handlers needed quick access to the accommodation record, or investigations would stall and repeat.

Preparing borrowers for the exit

Forbearance pauses payments; it does not forgive them. Early in the pandemic, confusion spread about whether borrowers would owe missed payments in a lump sum at the end. Policies from the government-sponsored enterprises and federal agencies developed over the following weeks to offer deferral and other options. Borrowers still needed clear and accurate information from their servicer at the outset.

That made content a compliance matter. Scripts, letters and web pages had to be accurate, consistent across channels and updated as investor and agency policies changed. Servicers needed a way to push a change to every channel at once, and a record of what each borrower had been told and when. A content management process with legal review and version history did more to reduce risk than any single script.

Exit also required scheduling. A borrower granted 180 days needed outreach before the period ended, describing the options and the steps required. That depends on knowing each borrower’s end date, the investor rules that apply and the right channel to reach them. Missed outreach turns a temporary pause into a delinquency, with consequences for the borrower and for the servicer’s compliance record. Servicers that tracked outreach completion rates by cohort could see the problem weeks before it showed up in delinquency reports.

The three problems shared a root cause. Servicing platforms that were configurable rather than hard-coded, content that was managed centrally, and accommodation data held in one place let institutions absorb a statutory change in weeks. Institutions without them built backlogs that took months to clear.

With hindsight

Large numbers of borrowers used forbearance in 2020 and 2021, and most exited into deferrals, modifications or reinstatement rather than foreclosure. The feared wave of foreclosures did not arrive at anything like the scale of the 2008 crisis, helped by rising home prices that left most borrowers with equity. The Consumer Financial Protection Bureau adopted temporary amendments to its mortgage servicing rules in 2021, adding procedural safeguards before foreclosure for borrowers leaving pandemic forbearance.

The intake, reporting and exit capabilities built in 2020 are the same ones servicers now use for hurricane, wildfire and other disaster relief, which arrives with the same short notice. Credit reporting accuracy for accommodated accounts remained an area of supervisory focus and consumer complaints well after the emergency ended.