The American Bankers Association (ABA) appreciates the opportunity to talk about the Consumer Financial Protection Bureau's (Bureau) interim last guideline (IFR) impacting the treatment of specific COVID-19 related Loss Mitigation Options under RESPA and Reg. X. ABA values the Bureau's understanding of the complex issues dealing with mortgage borrowers and servicers during the COVID-19 pandemic and the Bureau's effort to offer temporary options that help with servicer options to help pandemic-affected borrowers. ABA thinks that the IFR supplies an efficient balance of debtor protections and servicer versatility, which will benefit both customers and industry considerably.
Summary of the Comment:
ABA highly supports the IFR's provisions that amend Regulation X to allow mortgage servicers to provide briefly specific loss mitigation alternatives without getting a complete loss mitigation application. These temporary accommodations will greatly assist servicers by fixing regulative doubts worrying the application of Regulation X to post-forbearance processes, and they will significantly lower problems associated with requirements to process complete loss mitigation applications for loan deferments. Given the high volumes of loans that are presently in COVID-related forbearances, we think the benefits of this guideline are substantial.
In addition, the information in the IFR will remove numerous of the lingering compliance uncertainties surrounding Government Sponsored Enterprise (GSE) programs that feature structured application treatments.2 Because other mortgage financiers and insurance providers have revealed comparable loss mitigation alternatives, and given that extra primary and secondary market entities are most likely to use GSE models as templates for their own COVID forbearance programs, we think this IFR will have a robust favorable influence on markets and consumers.
However, ABA suggests additional modifications to the IFR that will further aid debtors and servicers during this unmatched time and better attain the Bureau's objectives. We go over these recommendations listed below.
Additional Recommendations:
First, 12 CFR 1024.41(c)( 2 )(v)(B) supplies that a servicer does not have to send out a loss mitigation application recommendation letter or adhere to the affordable diligence obligations to help a customer complete an application" [o] nce the borrower accepts an offer made pursuant to" the IFR. While ABA completely supports the Bureau's objective of decreasing burdens on servicers during these unsure times and believes this is wholly proper under the circumstances, we do not think the rule, as written, will have the desired result. Many, maybe most, of the discussions wherein a servicer examines and provides a deferral plan will be thought about a loss mitigation application pursuant to Regulation X, which would generally set off the requirement to send an acknowledgment letter within five organization days. Following these discussions, servicers can not wait to see if the debtor accepts the deferral offer before figuring out whether it requires to please the acknowledgment 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 customer is allowed to, and in turn does, accept the deferment deal on the preliminary phone call with the servicer. To achieve what we presume to be the Bureau's intent, ABA advises that the Bureau move the acknowledgment letter timeline to five company days after a debtor rejects any deferral deal.
Second, in order to qualify as a deferment under the IFR, a servicer needs to "waive [] all existing late charges, charges, stop payment fees, or similar charges quickly upon the customer's approval of the loss mitigation alternative." As written, it appears that servicers need to waive all of these quantities, even if the charges or charges were accumulated or evaluated long before the COVID-19 pandemic. For instance, a debtor could have a late charge from 2018 that is impressive. However, in order to get approved for this choice under the IFR, the servicer will have to accept waive that charge.
ABA believes that needing the waiver of any quantities that were accrued or examined pre-COVID is unreasonable, arbitrary, and will likely serve as a substantial deterrent to providing a deferral plan. ABA urges the Bureau to clarify that the waiver uses just to amounts accrued or assessed as a result of a payment that was not paid since of a financial difficulty due, directly or indirectly, to the COVID-19 emergency.
Additionally, the phrase "similar charges" in the IFR is ambiguous and is creating substantial confusion in the industry. ABA asks the Bureau to think about removing this phrase or, in the option, clarify it. ABA presumes that the Bureau did not mean for this arrangement to require servicers to waive third party expenditures that are usually enabled to be passed onto borrowers-expenses such as residential or commercial property examination costs, residential or commercial property preservation fees, foreclosure lawyer fees, and so forth. At a minimum, ABA respectfully requests that the Bureau think about clarifying that the arrangement does not cover these types of expenses/charges.
ABA Responses to Specific Ask For Comment:
The Bureau is especially interested in whether the amendments properly balance supplying flexibility to servicers to provide relief rapidly during the COVID-19 emergency situation with supplying important defenses for borrowers participated in the loss mitigation application process, such as defenses from foreclosure.
ABA thinks that the Bureau has appropriately well balanced consumer defense and operational efficiency. ABA concurs with the Bureau's evaluation that extra flexibilities are suitable during the remarkable circumstances provided by the COVID-19 emergency. The structured application procedures stated in the IFR help make sure that servicers have the resources to resolve the incredibly big number of customers that will exit forbearances in the coming months. The guideline adequately stabilizes these structured procedures with customer securities. The unique payment deferral programs advanced by the Federal Housing Finance Agency (FHFA) and other entities will permit eligible borrowers to avoid the threat of losing their homes, and enable them to resume repaying their mortgage loans without incurring a delinquency or additional charges or interest, and the programs provide options on how to pay back the forborne amount that servicers have actually postponed. This interim guideline guarantees that the customer advantages and defenses planned by these nationwide programs are efficiently ensured as a condition to any regulative benefits offered.
The Bureau also seeks talk about whether to require written disclosures for this, or any similar exceptions that the Bureau may license in the future.
Most lenders memorialize the transaction with a deal letter to the customer. This letter is an easy and concise confirmation of the loss mitigation option and statement that the payments postponed will result in the forborne quantities being due at refinance, sale, or reward of the loan. ABA would not recommend a short-term offer disclosure as an additional requirement throughout catastrophes or emergencies. This requirement would increase the burden and slow the relief the servicer is offering to their debtors. In addition, it might confuse the customer with unwanted kinds at a stressful point at the same time.
The Bureau likewise looks for remark on whether the Bureau should extend the exception established in brand-new § 1024.41(c)( 3 )(v) to other post-forbearance loss mitigation choices provided to customers impacted by other kinds of disasters and emergencies.
ABA believes the advantages managed under this IFR must be expanded to other post-forbearance loss mitigation options created to alleviate COVID-affected customers and also to customers affected by other kinds of catastrophes and emergency situations. The VA, USDA and FHA offer feasible loan adjustment options, such as enhance modifications, that are not covered under this exemption, as well other Fannie Mae and Freddie Mac loss mitigation options, such as Flex Mods. Our company believe these alternatives are all advantageous to the consumer and needs to be available in an effective and streamlined way throughout this emergency situation and other disasters and emergency situations.
These other adjustment options would not qualify under the interim rule mainly due to the fact that of the prohibition on interest accrual on postponed payments and the requirement that the covered quantities should be repaid at the end of the loan term. We see no valid reason to leave out these important COVID-19 programs from the menu of alternatives readily available to customers based upon an incomplete loss mitigation application. Some debtors will not receive the payment deferment alternatives, and additional alternatives will be important to guarantee relief for all customers.
ABA suggests that the Bureau customize the criteria under 1024.41(c)( 2 )(v)(A)( 2) so that the relief provided by the rule can be used for other types of loss mitigation services. This small information would substantially expand borrower choices that are necessary throughout the COVID-19 pandemic in addition to other catastrophes and emergencies.
The Bureau has no factor to believe that the extra versatility offered to covered individuals by this interim final rule would differentially affect customers in rural locations. The Bureau requests comment regarding the effect of the modified arrangements on consumers in backwoods and how those effects might differ from those experienced by consumers usually.
ABA does not see the requirement for extra versatility in the IFR for servicers in rural areas.
Conclusion:
ABA values the opportunity to talk about this proposal. If you have any questions about the content of this letter, please contact Sharon Whitaker at 202-663-5321 or Rod Alba at 202-663-5592.
