CFPB issues rules to help borrowers, mortgage lenders and service agents after federal moratorium on foreclosures expires | White Rome LLP

On June 28, 2021, the Consumer Financial Protection Bureau (“CFPB”) issued a final rule (the “COVID-19 Mortgage Services Rule 2021”) Amending Regulation X to protect borrowers from financial hardship when forbearance plans expire and to ease pressure on mortgage agents, who are likely to be inundated with requests for loss mitigation assistance in the coming months. The new rules, which apply to loans on principal residences, will come into force on August 31, 2021.

The CFPB estimates that more than two million homeowners are currently in COVID-19 hardship forbearance programs, with at least 900,000 homeowners expected to opt out of these programs by the end of the year. The 2021 COVID-19 Mortgage Servicing Rule aims to prevent what the CFPB considers preventable foreclosures by establishing procedural guarantees to ensure that most borrowers who have become severely delinquent during the COVID-19 pandemic will have the possibility of being considered for all loss mitigation options. before being returned to foreclosure. This rule also allows mortgage agents to provide faster assistance to borrowers by offering them simplified loan modifications without requiring full loss mitigation applications. Mortgage officers will also be required to increase borrower awareness before initiating foreclosure in order to provide borrowers with important repayment information or other loss mitigation options.

Temporary procedural guarantees

The COVID-19 Mortgage Servicing Rule 2021 establishes temporary procedural guarantees to ensure that some borrowers have the opportunity to apply for loss mitigation assistance before their loan is returned to foreclosure after expiration of foreclosure moratoriums apply. These procedural guarantees only apply to loans for which the borrower has been in arrears for more than 120 days from March 1, 2020, and for which the applicable limitation period does not expire before January 1, 2022 or later. For loans subject to these procedural guarantees, service agents cannot return this loan to foreclosure at any time before January 1, 2022, without first ensuring that at least one of the following three procedural guarantees is met. : 1) the borrower has abandoned the property; 2) the borrower is more than 120 days late on his mortgage and has not responded to the required after-sales service intervention for 90 days; or 3) the borrower has submitted a full loss mitigation request, has been assessed for all available loss mitigation options based on that request, and has been in arrears since submitting the mitigation request losses.

If the procedural safeguards do not apply, or if the serving agent has complied with any of the procedural safeguards, the serving agent may proceed with the foreclosure referral before January 1, 2022, provided that such referral is otherwise. permitted by existing mortgage service rule and other applicable law.

Simplified reviews of loan modifications

Mortgage management rules previously prohibited managers from conducting a loss mitigation review on the basis of an incomplete loss mitigation program, except in certain circumstances, such as in the case of short forbearance. term or as part of certain COVID-19 loss mitigation options. discussed in the CFPB June 2020 Provisional Final Rule. The COVID-19 Mortgage Services Rule 2021 added another exception to this general rule. To benefit from this exception, the loan modification program in question must be available to borrowers facing difficulties related to COVID-19 (although it must not only be available to those borrowers). The amendment must also terminate or be designed to terminate any pre-existing default and must not (i) extend the term of the loan by more than 40 years from the effective date of the amendment, (ii) increase the borrower’s monthly payment beyond the amount that was required before the modification, (iii) result in the accumulation of interest on the deferred amounts, or (iv) include charges related to the loan modification. The resulting amendment must also waive all fees, penalties and similar charges incurred as of March 1, 2020.

The rule also provides that if a borrower defaults again as a result of accepting a loan modification based on an incomplete loss mitigation request, the serving agent must provide the borrower with the notice. incomplete application (if he has not done so before) and must immediately resume due diligence to obtain a complete application.

Awareness requirements

Mortgage management rules currently require service agents to make direct contact with defaulting borrowers no later than the 36th day of the borrower’s default, and make additional contacts no later than 36 days after each due date. payment due, as long as the borrower remains in default. The COVID-19 rule on mortgage servicing 2021 requires agents to provide certain additional information from August 31, 2021 until October 1, 2022. For borrowers who are not on forbearance at the time of the live contact is established, officers must provide a statement regarding the availability of COVID-19-related opt-out options, and a list of such programs, if applicable. The serving agent should also provide the borrower with at least one way to find contact details for homeownership counseling services, such as referring the borrower to the information available on their periodic billing statement.

Alternatively, for borrowers who are in a forbearance program at the time the live contact is made, a service agent must provide additional information during the live contact which takes place 10-45 days before the scheduled end of the program. abstention. Specifically, the service agent should inform the borrower of the expected end date of the program, provide a list of available loss mitigation options, and provide the borrower with at least one way to find contact information for the loan services. advice on homeownership, as required for borrowers not subject to forbearance. .

Mortgage agents must act quickly to update their borrower awareness and loss mitigation policies and procedures to ensure they will be able to comply with these new rules as of August 31, 2021.