WASHINGTON–In a letter to the CFPB on a proposal to amend the Regulation X servicing rules, the Mortgage Bankers Association (MBA) and the National Mortgage Servicing Association said they support efforts to clarify the complex Reg X provisions but there are “elements in the proposal that require further attention, and several critical improvements.”
Saying it was offering its input in the “spirit of working with the Bureau to assist borrowers with COVID-related hardships, the two organizations offered the following recommendations regarding the proposal:
- The foreclosure moratorium should include clear exceptions to prevent the harm the proposed rule seeks to address. The letter states safeguards are already codified in Regulation X, and there is “no evidence to suggest that the current rules provide inadequate protection to borrowers confronting a pandemic-related hardship.”
- The letters notes the proposed rule acknowledges that there are situations in which prolonging initiation of the foreclosure process does not provide any additional borrower protections but instead only puts them in deeper debt, for example…Allowing initiation of foreclosures in these situations can, in some cases, be beneficial to borrowers either by prompting them to finally engage with their servicer to explore loss mitigation options or by triggering the availability of state-level foreclosure prevention programs. The organizations offered several recommendations for exemptions from the foreclosure moratorium.
Recommendations
In addition to creating the exemptions, the letters says the Bureau should also:
- Clearly define what constitutes an “abandoned” property, and state that abandoned property is not subject to the foreclosure moratorium. The failure to create a clear definition of “abandoned” will undermine the utility of this exception.
- Clarify that the rule does not apply to accounts that have already been referred to foreclosure, including instances where a servicer made the first notice or filing required by applicable law prior to the initial CDC moratorium.
- Clarify the limitation in proposed Section 1024.41(c)(2)(vi)(A)(1) that the modification “does not cause the borrower’s monthly required principal and interest payment to increase.”
- Clarify that the late fee limitation of proposed Section 1024.41(c)(2)(vi)(A)(2) applies only to those fees listed and incurred during the period of forbearance and not to late fees or charges from pre-forbearance delinquencies.
- Remove the phrase “or similar charges” from the fee limitations at proposed Section 1024.41(c)(2)(vi)(A)(2).
- Include an exemption from the anti-evasion provision to cover other COVID-19 loss mitigation solutions, including, but not limited to, GSE and agency repayment plans and loan modifications (including those which may result in an increase in original principal and interest amount).
- Clarify that reliance on the streamlined modification exemption is completely voluntary, and that investors are not required to make available loan modifications on the basis of an incomplete loss mitigation application.
- Clarify that the acknowledgment letter timeline begins five business days after a borrower rejects any COVID-related loan modification offer.
The full letter can be found in CUToday.info’s The Gov here.