WASHINGTON—As the CFPB considers changes to mortgage servicing requirements to protect borrowers affected by the coronavirus pandemic, NAFCU is calling on the Bureau "to provide clarity surrounding this rule's early intervention requirements and the streamlined loan modification option to reduce implementation burdens on servicers."
The Bureau issued the proposal in April 2020 in what it said was an attempt to preempt an expected wave of foreclosures once COVID-related relief provisions expire. It would modify the Real Estate Settlement Procedures Act (RESPA), or Regulation X, by:
- Creating a temporary COVID-19 emergency pre-foreclosure review period that would prohibit mortgage servicers from making the first notice or filing required for judicial or non-judicial foreclosure until after Dec. 31, 2021
- Allowing streamlined loan modification options to borrowers with COVID-19-related hardships based on an evaluation of an incomplete loan modification, provided certain criteria are met
- Amending the early intervention requirements and requires mortgage servicers to discuss additional COVID-19-related information during live contact with borrowers not in a forbearance program where available options exist, and provide information for those borrowers in a forbearance program at least 30 days before the end of the forbearance program. The proposed early intervention requirements would sunset Aug. 31, 2022
The Concerns
Kaley Schafer, NAFCU's senior regulatory affairs counsel, said the trade group has concerns over the added implementation burdens of its proposed early intervention requirements, and in the letter she asked the Bureau to clarify these requirements if ongoing contact with borrowers has been established.
She also offered the association's general support of the streamlined loan modification options, but again asked for clarity on whether servicers should follow the bureau's guidance on required factors if they conflict with investor guidance.
On the pre-foreclosure review period, Schafer said the proposed review period and current mortgage servicing rule would "serve as a sufficient backstop to ensure borrowers are aware of and have a meaningful opportunity to be evaluated for loss mitigation options" without delaying the foreclosure process against delinquent borrowers.
Strain on Liquidity
Other groups have also cited the consequences this proposal could have on the market, NAFCU noted.
"In addition, the pre-foreclosure review may cause a strain on liquidity as servicers may need to provide for the continued payment of taxes and insurance in escrow accounts or other costs required in the underlying contract," Schafer wrote. "Early in the pandemic, NAFCU members expressed concern regarding liquidity in offering forbearances. This was especially concerning before the GSEs announced their policy limiting the number of payments servicers were required to make. Those servicers experiencing a minor to moderate strain on liquidity will likely feel a deeper impact due to the proposed three-month pre-foreclosure review period."