Servicer Homeowner Assistance; Rescinding COVID Guidance

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The Consumer Financial Protection Bureau (CFPB) is warning mortgage servicers to take all necessary steps now to prevent a wave of avoidable foreclosures this fall.

Millions of homeowners currently in forbearance will need help from their servicers when the pandemic-related federal emergency mortgage protections expire this summer and fall. The CFPB is advising servicers to dedicate sufficient resources and staff now to ensure they are prepared for a surge in borrowers needing help.

The Coronavirus Aid, Relief, and Economic Security (CARES) Act provides borrowers with federally backed mortgages with access to forbearance, and private lenders have also provided similar assistance. As of January 2021, approximately 2.7 million borrowers remained in such programs, with 2.1 million borrowers in forbearance and at least 90 days delinquent on their mortgage payments. Another 242,000 mortgages not in forbearance programs were at least 90 days delinquent. Industry data suggest that nearly 1.7 million borrowers will exit forbearance programs in September and the following months, with many of them a year or more behind on their mortgage payments. Beginning with the expiration of the federal foreclosure moratoriums at the end of June 2021, mortgage servicers will need ramped-up capacity to reach out and respond to the large number of homeowners likely to need loss mitigation assistance.

In its oversight of mortgage servicers, the CFPB is focused on preventing avoidable foreclosures. It will pay particular attention to how well servicers are:

  • Being proactive. Servicers should contact borrowers in forbearance before the end of the forbearance period so they have time to apply for help.
  • Working with borrowers. Servicers should work to ensure borrowers have all necessary information and should help borrowers in obtaining documents and other information needed to evaluate the borrowers for assistance.
  • Addressing language access. The CFPB will look carefully at how servicers manage communications with borrowers with limited English proficiency and maintain compliance with the Equal Credit Opportunity Act and other laws.
  • Evaluating income fairly. Where servicers use income in determining eligibility for loss mitigation options, servicers should evaluate borrowers’ income from public assistance, child-support, alimony or other sources in accordance with the Equal Credit Opportunity Act’s anti-discrimination protections.
  • Handling inquiries promptly. The CFPB will closely examine servicer conduct where hold times are longer than industry averages.
  • Preventing avoidable foreclosures. The CFPB will expect servicers to comply with foreclosure restrictions in Regulation X and other federal and state restrictions in order to ensure that all homeowners have an opportunity to save their homes before foreclosure is initiated.

Provided that servicers are demonstrating effectiveness in helping consumers, in accord with the April 1 compliance bulletin, the CFPB will continue to evaluate servicer activity consistent with the Joint Statement on Supervisory and Enforcement Practices Regarding the Mortgage Servicing Rules in Response to the COVID-19 Emergency and the CARES Act on April 3, 2020, which provides flexibility on certain timing requirements in the regulations.

Click here to read the April 1, 2021 compliance bulletin. Click here to read the interagency statement regarding flexibilities under Regulation X.

Bureau Rescinds Certain COVID-19 Guidance
The CFPB has also released seven notices rescinding certain COVID-19 regulatory flexibility guidance provided last spring. Between March 26, 2020 and June 3, 2020, the bureau issued the following statements providing regulatory flexibilities (supervisory and enforcement practices) during the COVID-19 emergency:

  • Quarterly Reporting Under the Home Mortgage Disclosure Act.
  • Bureau Information Collections for Credit Card and Prepaid Account Issuers.
  • Response to the COVID-19 Pandemic.
  • Fair Credit Reporting Act and Regulation V in Light of the CARES Act.
  • Certain Filing Requirements Under the Interstate Land Sales Full Disclosure Act and Regulation J.
  • Regulation Z Billing Error Resolution Timeframes in Light of the COVID-19 Pandemic.
  • Electronic Credit Card Disclosures in Light of the COVID-19 Pandemic.

The CFPB intends to exercise its supervisory and enforcement authority consistent with the Dodd-Frank Wall Street Reform and Consumer Protection Act. As such, it does not intend to continue to provide the flexibilities afforded entities in the following interagency statements as of April 1, 2021:

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