WASHINGTON–CUNA has told the CFPB it supports the Bureau’s Regulation X amendments regarding streamlined modifications, but said it also “strongly objects” to a proposed moratorium on foreclosures until 2022.
CUNA’s comment is in response to a set of rules changes the CFPB proposed last month that would generally prohibit mortgage servicers from starting foreclosure until after Dec. 31, 2021.
“Regarding the proposed moratorium on foreclosures, the Bureau’s proposal is unnecessary, overbroad to the point of being unconstitutional, and adds additional complexity at a time when it is least needed,” CUNA said in its letter, adding it believes the moratorium exceeds the Bureau’s authority, restricts commercial speech and impedes access to the courts.
‘Constitutionally Suspect’
“When servicers contact consumers about the consequences of nonpayment, they are engaging in non-deceptive commercial speech, which is protected by the First Amendment,” the letter continues. “Additionally, servicers have a First Amendment right to petition the government, which includes access to the courts. Thus, an infringement of that right is constitutionally suspect.
“By restricting the exercise of servicers’ legal rights to engage in commercial speech and access the courts without providing a countervailing benefit, the Proposed Rule infringes on the constitutional rights of loan owners and investors and thus is vulnerable to a First Amendment challenge,” CUNA added.
Other Suggestions
CUNA also suggested in its letter the CFPB is likely “overstating” its estimate that 800,000 loans will exit forbearance in September and October, saying it believes the loans will exit forbearance in a “much less concentrated time frame.”
CUNA further called on the CFPB to finalize other provisions of the proposed rule, including provisions that will allow credit unions to offer streamlined COVID-19 modifications that “require less paperwork.”
As CUToday.info reported earlier and as CUNA noted, the proposal would:
- Establish a “special pre-foreclosure review” until Dec. 31, 2021, during which time mortgage servicers will not be permitted to initiate foreclosure on any property considered the borrower’s principal residence.
- Temporarily permit mortgage servicers to offer certain streamlined loan modifications based on an incomplete application.
- Amends the requirements for early intervention and reasonable diligence obligations
‘Least Amount of Strain’
CUNA added in its letter that it believes “The proposed amendments will ensure that borrowers can quickly and easily transition to a paying status on their mortgage, protecting their homes, credit scores, and financial security. This will also present the least amount of strain on credit union capacity and liquidity.”
The trade group also suggested a change in the early intervention requirements proposed by the CFPB, to remove a reference to “the last live contact” and replace with “a live contact no later than 30 days prior to the expiration of borrower’s current forbearance period.”