We Discuss These Recommendations Below
The American Bankers Association (ABA) values the chance to comment on the Consumer Financial Protection Bureau's (Bureau) interim last guideline (IFR) affecting the treatment of certain COVID-19 related Loss Mitigation Options under RESPA and Reg. X. ABA appreciates the Bureau's understanding of the complex concerns facing mortgage borrowers and servicers during the COVID-19 pandemic and the Bureau's initiative to use short-lived options that facilitate servicer choices to help pandemic-affected debtors. ABA thinks that the IFR provides an effective balance of customer protections and servicer flexibility, which will benefit both consumers and industry significantly.
Summary of the Comment:
ABA highly supports the IFR's provisions that modify Regulation X to allow mortgage servicers to provide momentarily specific loss mitigation options without getting a total loss mitigation application. These temporary accommodations will greatly assist servicers by resolving regulatory doubts worrying the application of Regulation X to post-forbearance processes, and they will substantially decrease burdens 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 believe the advantages of this rule are significant.
In addition, the clarifications in the IFR will get rid of a number of the remaining compliance uncertainties surrounding Government Sponsored Enterprise (GSE) programs that include structured application procedures.2 Because other mortgage investors and insurers have actually announced comparable loss mitigation alternatives, and because extra primary and secondary market entities are likely to utilize GSE models as templates for their own COVID forbearance programs, we think this IFR will have a robust favorable effect on markets and consumers.
However, ABA recommends additional modifications to the IFR that will further aid borrowers and servicers during this unprecedented time and better attain the Bureau's objectives. We talk about these suggestions below.
Additional Recommendations:
First, 12 CFR 1024.41(c)( 2 )(v)(B) offers that a servicer does not need to send a loss mitigation application recommendation letter or abide by the sensible diligence commitments to assist a debtor complete an application" [o] nce the borrower accepts a deal made pursuant to" the IFR. While ABA completely supports the Bureau's goal of lowering problems on servicers throughout these uncertain times and believes this is completely proper under the scenarios, we do not believe the guideline, as written, will have the designated result. Many, perhaps most, of the discussions in which a servicer evaluates and offers a deferral strategy will be considered a loss mitigation application pursuant to Regulation X, which would normally trigger the requirement to send out an acknowledgment letter within five organization days. Following these discussions, servicers can not wait to see if the customer accepts the deferral deal before identifying whether it requires to satisfy the recommendation letter requirements. Practically speaking, it would appear that the only time in which the interim last rule would enable a servicer to pass up the acknowledgment letter requirements is if the debtor is permitted to, and in turn does, accept the deferment deal on the initial telephone call with the servicer. To achieve what we presume to be the Bureau's intent, ABA recommends that the Bureau move the acknowledgment letter timeline to 5 organization days after a customer declines any deferral deal.
Second, in order to qualify as a deferral under the IFR, a servicer must "waive [] all existing late charges, penalties, stop payment charges, or similar charges promptly upon the debtor's acceptance of the loss mitigation alternative." As written, it appears that servicers should waive all of these quantities, even if the charges or charges were accumulated or assessed long before the COVID-19 pandemic. For circumstances, a debtor could have a late cost from 2018 that is exceptional. However, in order to receive this option under the IFR, the servicer will have to consent to waive that cost.
ABA thinks that needing the waiver of any quantities that were accrued or evaluated pre-COVID is unreasonable, arbitrary, and will likely serve as a considerable deterrent to using a deferral strategy. ABA urges the Bureau to clarify that the waiver uses only to amounts accumulated or assessed as an outcome of a payment that was not paid because of a monetary hardship due, directly or indirectly, to the COVID-19 emergency.
Additionally, the expression "similar charges" in the IFR is unclear and is creating significant confusion in the industry. ABA asks the Bureau to consider eliminating this expression or, in the alternative, clarify it. ABA presumes that the Bureau did not mean for this provision to need servicers to waive third celebration costs that are generally enabled to be passed onto borrowers-expenses such as residential or commercial property assessment fees, residential or commercial property conservation costs, foreclosure lawyer charges, and the like. At a minimum, ABA respectfully requests that the Bureau consider clarifying that the arrangement does not cover these kinds of expenses/charges.
ABA Responses to Specific Requests for Comment:
The Bureau is particularly thinking about whether the modifications appropriately balance providing versatility to servicers to provide relief quickly during the COVID-19 emergency situation with supplying crucial securities for debtors participated in the loss mitigation application process, such as protections from foreclosure.
ABA believes that the Bureau has appropriately well balanced consumer protection and operational performance. ABA agrees with the Bureau's assessment that additional flexibilities are suitable during the remarkable scenarios provided by the COVID-19 emergency situation. The streamlined application procedures stated in the IFR help make sure that servicers have the resources to address the extremely large number of customers that will exit forbearances in the coming months. The guideline effectively stabilizes these structured processes with customer defenses. The unique payment deferment programs advanced by the Federal Housing Finance Agency (FHFA) and other entities will allow eligible borrowers to avoid the danger of losing their homes, and permit them to resume repaying their mortgage loans without incurring a delinquency or extra charges or interest, and the programs provide alternatives on how to pay back the forborne amount that servicers have delayed. This interim guideline assures that the customer advantages and protections meant by these national programs are successfully ensured as a to any regulatory benefits offered.
The Bureau also seeks discuss whether to need written disclosures for this, or any similar exceptions that the Bureau may license in the future.
Most lending institutions memorialize the deal with a deal letter to the borrower. This letter is a simple and concise confirmation of the loss mitigation option and testimony that the payments delayed will lead to the forborne quantities being due at refinance, sale, or payoff of the loan. ABA would not advise a short-term offer disclosure as an extra requirement throughout catastrophes or emergencies. This requirement would increase the concern and slow the relief the servicer is providing to their debtors. In addition, it may confuse the customer with unneeded types at a demanding point at the same time.
The Bureau also seeks comment on whether the Bureau must extend the exception developed in brand-new § 1024.41(c)( 3 )(v) to other post-forbearance loss mitigation alternatives offered to debtors affected by other kinds of disasters and emergency situations.
ABA believes the benefits paid for under this IFR ought to be broadened to other post-forbearance loss mitigation options created to alleviate COVID-affected debtors and also to borrowers affected by other kinds of catastrophes and emergencies. The VA, USDA and FHA provide viable loan adjustment options, such as streamline adjustments, that are not covered under this exemption, too other Fannie Mae and Freddie Mac loss mitigation solutions, such as Flex Mods. Our company believe these choices are all helpful to the customer and needs to be available in an effective and streamlined manner during this emergency and other disasters and emergency situations.
These other modification choices would not certify under the interim rule primarily because of the prohibition on interest accrual on delayed payments and the requirement that the covered quantities must be paid back at the end of the loan term. We see no valid factor to omit these valuable COVID-19 programs from the menu of choices available to customers based upon an insufficient loss mitigation application. Some customers will not get approved for the payment deferment options, and extra choices will be essential to guarantee relief for all customers.
ABA advises that the Bureau customize the requirements under 1024.41(c)( 2 )(v)(A)( 2) so that the relief offered by the guideline can be utilized for other types of loss mitigation solutions. This small clarification would significantly expand borrower options that are essential during the COVID-19 pandemic as well as other disasters and emergency situations.
The Bureau has no factor to believe that the extra versatility used to covered individuals by this interim final rule would differentially affect customers in rural locations. The Bureau requests comment regarding the impact of the modified arrangements on consumers in backwoods and how those impacts may differ from those experienced by customers generally.
ABA does not see the requirement for extra flexibility in the IFR for servicers in backwoods.
Conclusion:
ABA values the opportunity to talk about this proposal. 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.