MReport July 2019

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42 | TH E M R EP O RT SERVICING THE LATEST O R I G I NAT I O N S E R V I C I N G DATA G O V E R N M E N T S E C O N DA R Y M A R K E T Providing Consumer Relief Goldman Sachs has fulfilled its obligation to mortgage-backed securities settlements. G oldman Sachs success- fully completed about 77% of the $1.8 billion in consumer relief it is obligated to provide under its two mortgage-backed securities settle- ments with the U.S. Department of Justice and three states, accord- ing to a report by the indepen- dent monitor of settlements. The report, commissioned by professional mediator and retired Boston University law professor Eric Green, found that Goldman Sachs surpassed the minimum amount of consumer relief in each of the settling states of California, Illinois, and New York. Green, who was assisted by a team of finance, accounting, and legal profession- als, was named an independent monitor by the settling states for determining whether Goldman Sachs fulfilled its consumer-relief obligations. Since March 1, Goldman Sachs forgave the balances due on 819 first-lien mortgage, for total prin- cipal forgiveness of approximately $85 million. The company also for- gave amounts due and previously deferred on 30 first-lien mortgages of more than $4.2 million. The report adds that Goldman Sachs received credit related to an agreement allowing the lender to defer until a later date on the repayment of the principal due on 58 mortgage loans, totaling more than $4 million. Altogether, the total reportable credit of all items is approximately $92.5 million. "A little more than three years after the settlement agreements were signed, Goldman Sachs appears to be approximately 77% toward completing its consumer relief obligations," Green said in the report. "While Goldman Sachs has not yet provided a submission specifically claiming that it has met any of the credit mini- mums under the Global Settlement Agreement, the data suggest that Goldman Sachs has now exceeded the minimum amount of credit that must be earned in each of the three settling states of California, Illinois, and New York." The modified first-lien mort- gages are spread across 45 states and the District of Columbia, with 33% of the credit located in the settling areas. Forty-seven percent of the credit was located in the "hardest hit areas," or areas identi- fied by HUD for containing large sections of distressed properties and foreclosures. Goldman Sachs also reached set- tlements with the National Credit Union Administration Board and the Federal Home Loan Banks of Chicago and Des Moines. The settlements state that Goldman Sachs agreed to provide a total of $5.06 billion, as well as $1.8 billion in consumer relief to be distributed by the end of January 2021. "A little more than three years after the settlement agreements were signed, Goldman Sachs appears to be approximately 77% toward completing its consumer relief obligations." —Eric Green, Boston University law professor (retired) The Refi Impact A report gives insights into why its becoming increasingly difficult for servicers to retain customers. S ervicer retention hit a record low in Q1 2019 as customer retention became increasingly difficult, according to a Black Knight report. Black Knight notes that around 18% of bor- rowers remained with the same servicer post-refi, the first time the retention rate has dropped below 20% since at least 2005. The report stated that customer retention has become increasingly difficult as a volatile refinance market and greater rate sensitivity shrink the number of remain- ing refinance candidates, further heightening competition. According to Black Knight's Data & Analytics Division President Ben Graboske, low retention rates have created some challenges. "In Q1 2019, fewer than one in five homeowners remained with their prior mortgage servicer after refinancing their first lien," Graboske said. "That is the lowest retention rate we've seen since Black Knight began tracking the metric in 2005. Anyone in this in- dustry can tell you that customer retention is key—not only to suc- cess, but to survival." Graboske noted that, with the slight increase in the 30-year fixed rate, around a million homeown- ers lost the incentive to refinance. "This is critical, because refi- nances driven by a homeowner seeking to reduce their rate or term have always been servicers' 'bread and butter' when it comes to customer retention," Graboske added. "Offering lower rates to qualified existing customers is a good, and relatively simple, way to retain their business. Unfortunately, the market has shifted dramatically away from such rate/term refinances." Black Knight's data also noted a continued decline in delinquen- cies and foreclosures. The report reveals that the delinquency rate declined by 5.3%, the small- est decline for any March in six years, while foreclosure starts fell by 1.5%. According to Black Knight, March's 39,700 foreclo- sure starts represented the lowest single-month total in more than 18 years, down 24% year-over-year.

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