The American Bankers Association (ABA) values the opportunity to talk about the Consumer Financial Protection Bureau's (Bureau) interim final rule (IFR) impacting the treatment of particular COVID-19 associated Loss Mitigation Options under RESPA and Reg. X. ABA values the Bureau's understanding of the intricate concerns facing mortgage borrowers and servicers throughout the COVID-19 pandemic and the Bureau's effort to offer short-term options that assist in servicer choices to assist pandemic-affected debtors. ABA believes that the IFR supplies an efficient balance of borrower securities and servicer versatility, which will benefit both consumers and industry considerably.
Summary of the Comment:
ABA strongly supports the IFR's provisions that change Regulation X to permit mortgage servicers to use temporarily certain loss mitigation alternatives without obtaining a complete loss mitigation application. These temporary lodgings will significantly assist servicers by dealing with regulative doubts concerning the application of Regulation X to post-forbearance processes, and they will considerably decrease problems related to requirements to process complete loss mitigation applications for loan deferrals. Given the high volumes of loans that are presently in COVID-related forbearances, we think the advantages of this guideline are significant.
In addition, the clarifications in the IFR will eliminate much of the sticking around compliance unpredictabilities surrounding Government Sponsored Enterprise (GSE) programs that include streamlined application treatments.2 Because other mortgage financiers and insurance companies have actually announced comparable loss mitigation options, and since additional primary and secondary market entities are most likely to use GSE designs as design templates for their own COVID forbearance programs, we believe this IFR will have a robust positive effect on markets and consumers.
However, ABA advises additional modifications to the IFR that will further aid borrowers and servicers during this extraordinary time and better achieve the Bureau's objectives. We discuss these suggestions below.
Additional Recommendations:
First, 12 CFR 1024.41(c)( 2 )(v)(B) provides that a servicer does not need to send out a loss mitigation application recommendation letter or adhere to the sensible diligence responsibilities to assist a borrower complete an application" [o] nce the customer accepts a deal made pursuant to" the IFR. While ABA fully supports the Bureau's goal of minimizing concerns on servicers throughout these unsure times and believes this is completely suitable under the situations, we do not think the rule, as written, will have the designated impact. Many, maybe most, of the conversations where a servicer assesses and uses a deferral strategy will be considered a loss mitigation application pursuant to Regulation X, which would generally trigger the requirement to send an acknowledgment letter within 5 organization days. Following these discussions, servicers can not wait to see if the debtor accepts the deferral deal before determining whether it needs to please the recommendation letter requirements. Practically speaking, it would appear that the only time in which the interim last guideline would enable a servicer to give up the recommendation letter requirements is if the borrower is permitted to, and in turn does, accept the deferral deal on the preliminary phone conversation with the servicer. To attain what we presume to be the Bureau's intent, ABA recommends that the Bureau move the acknowledgment letter timeline to five service days after a customer declines any deferral offer.
Second, in order to qualify as a deferment under the IFR, a servicer needs to "waive [] all existing late charges, penalties, stop payment charges, or comparable charges without delay upon the customer's acceptance of the loss mitigation choice." As composed, it appears that servicers must waive all of these quantities, even if the charges or fees were accrued or examined long before the COVID-19 pandemic. For example, a debtor might have a late fee from 2018 that is exceptional. However, in order to receive this choice under the IFR, the servicer will have to consent to waive that fee.
ABA thinks that needing the waiver of any quantities that were accrued or evaluated pre-COVID is unreasonable, approximate, and will likely work as a substantial deterrent to offering a deferral strategy. ABA advises the Bureau to clarify that the waiver uses only to amounts accumulated or evaluated as a result of a payment that was not paid because of a financial hardship due, directly or indirectly, to the COVID-19 emergency situation.
Additionally, the expression "similar charges" in the IFR is unclear and is producing considerable confusion in the industry. ABA asks the Bureau to think about removing this expression or, in the option, clarify it. ABA presumes that the Bureau did not intend for this provision to require servicers to waive third celebration costs that are typically permitted to be passed onto borrowers-expenses such as residential or commercial property inspection fees, residential or commercial property preservation charges, foreclosure attorney charges, and the like. At a minimum, ABA respectfully demands that the Bureau think about clarifying that the provision does not cover these kinds of expenses/charges.
ABA Responses to Specific Ask For Comment:
The Bureau is particularly interested in whether the modifications properly balance providing versatility to servicers to use relief rapidly during the COVID-19 emergency with providing crucial protections for borrowers engaged in the loss mitigation application process, such as securities from foreclosure.
ABA thinks that the Bureau has appropriately well balanced consumer protection and functional performance. ABA concurs with the Bureau's evaluation that additional versatilities are suitable throughout the remarkable circumstances presented by the COVID-19 emergency situation. The streamlined application treatments set forth in the IFR aid make sure that servicers have the resources to resolve the remarkably a great deal of borrowers that will leave forbearances in the coming months. The guideline effectively stabilizes these streamlined procedures with consumer protections. The unique payment deferment programs advanced by the Federal Housing Finance Agency (FHFA) and other entities will permit qualified borrowers to prevent the risk of losing their homes, and allow them to resume repaying their mortgage loans without sustaining a delinquency or additional costs or interest, and the programs offer alternatives on how to repay the forborne amount that servicers have actually deferred. This interim guideline guarantees that the customer advantages and securities meant by these national programs are effectively guaranteed as a condition to any regulatory advantages offered.
The Bureau also seeks discuss whether to require written disclosures for this, or any comparable exceptions that the Bureau may license in the future.
Most lenders memorialize the deal with an offer letter to the debtor. This letter is a basic and succinct confirmation of the loss mitigation service and testimony that the payments postponed will lead to the forborne quantities being due at refinance, sale, or reward of the loan. ABA would not recommend a short-term offer disclosure as an extra requirement during catastrophes or emergency situations. This requirement would increase the problem and slow the relief the servicer is providing to their debtors. In addition, it might puzzle the consumer with unneeded forms at a demanding point at the same time.
The Bureau also seeks discuss whether the Bureau should extend the exception established in new § 1024.41(c)( 3 )(v) to other post-forbearance loss mitigation options provided to customers affected by other kinds of catastrophes and emergency situations.
ABA thinks the benefits managed under this IFR must be broadened to other post-forbearance loss mitigation options designed to ease COVID-affected debtors and likewise to borrowers affected by other kinds of disasters and emergencies. The VA, USDA and FHA provide viable loan adjustment options, such as enhance adjustments, that are not covered under this exemption, also other Fannie Mae and Freddie Mac loss mitigation services, such as Flex Mods. Our company believe these choices are all beneficial to the consumer and needs to be offered in an effective and structured way during this emergency situation and other catastrophes and emergency situations.
These other adjustment alternatives would not qualify under the interim rule mostly due to the fact that of the restriction on interest accrual on postponed payments and the requirement that the covered quantities should be paid back at the end of the loan term. We see no valid reason to omit these valuable COVID-19 programs from the menu of alternatives readily available to consumers based upon an incomplete loss mitigation application. Some borrowers will not receive the payment deferment options, and additional alternatives will be important to assure relief for all customers.
ABA suggests that the Bureau modify the criteria under 1024.41(c)( 2 )(v)(A)( 2) so that the relief offered by the guideline can be used for other types of loss mitigation solutions. This little clarification would substantially expand customer choices that are required throughout the COVID-19 pandemic in addition to other catastrophes and emergencies.
The Bureau has no factor to think that the extra flexibility used to covered individuals by this interim final rule would differentially affect customers in rural areas. The Bureau demands comment relating to the impact of the amended arrangements on customers in backwoods and how those impacts may differ from those experienced by consumers typically.
ABA does not see the requirement for additional flexibility in the IFR for servicers in backwoods.
Conclusion:
ABA values the chance to discuss this proposition. If you have any concerns about the content of this letter, please contact Sharon Whitaker at 202-663-5321 or Rod Alba at 202-663-5592.
