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We Discuss These Recommendations Below

The American Bankers Association (ABA) values the chance to discuss the Consumer Financial Protection Bureau’s (Bureau) interim final rule (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 problems facing mortgage borrowers and servicers throughout the COVID-19 pandemic and the Bureau’s initiative to offer momentary services that facilitate servicer choices to help pandemic-affected debtors. ABA believes that the IFR supplies an effective balance of borrower protections and servicer flexibility, which will benefit both customers and industry significantly.

Summary of the Comment:

ABA strongly supports the IFR’s provisions that modify Regulation X to permit mortgage servicers to provide momentarily specific loss mitigation options without obtaining a total loss mitigation application. These short-lived lodgings will significantly help servicers by fixing regulatory doubts worrying the application of Regulation X to post-forbearance processes, and they will considerably lower problems related to requirements to process total loss mitigation applications for loan deferrals. Given the high volumes of loans that are currently in COVID-related forbearances, we think the advantages of this rule are significant.

In addition, the clarifications in the IFR will get rid of a number of the remaining compliance unpredictabilities surrounding Government Sponsored Enterprise (GSE) programs that feature streamlined application treatments.2 Because other mortgage financiers and insurance companies have actually announced comparable loss mitigation options, and given that extra main and secondary market entities are likely to use GSE models as templates for their own COVID forbearance programs, we believe this IFR will have a robust positive effect on markets and consumers.

However, ABA recommends extra modifications to the IFR that will even more aid borrowers and servicers throughout this extraordinary time and much better attain the Bureau’s objectives. We discuss these suggestions below.

Additional Recommendations:

First, 12 CFR 1024.41(c)( 2 )(v)(B) supplies that a servicer does not need to send a loss mitigation application acknowledgment letter or comply with the reasonable diligence obligations to help a customer finish an application” [o] nce the customer accepts an offer made pursuant to” the IFR. While ABA totally supports the Bureau’s objective of decreasing burdens on servicers throughout these unsure times and thinks this is entirely proper under the circumstances, we do not think the rule, as written, will have the desired impact. Many, perhaps most, of the conversations wherein a servicer examines and uses a deferral plan will be considered a loss mitigation application pursuant to Regulation X, which would generally trigger the requirement to send a recommendation letter within 5 company days. Following these discussions, servicers can not wait to see if the borrower accepts the deferral deal before determining whether it needs to satisfy the recommendation letter requirements. Practically speaking, it would seem that the only time in which the interim final guideline would permit a servicer to forgo the acknowledgment letter requirements is if the customer is allowed to, and in turn does, accept the deferral deal on the initial phone conversation with the servicer. To achieve what we presume to be the Bureau’s intent, ABA suggests that the Bureau move the acknowledgment letter timeline to 5 service days after a customer rejects any deferment deal.

Second, in order to certify as a deferment under the IFR, a servicer must “waive [] all existing late charges, charges, stop payment fees, or similar charges promptly upon the debtor’s acceptance of the loss mitigation alternative.” As composed, it appears that servicers should waive all of these amounts, even if the charges or costs were accrued or assessed long before the COVID-19 pandemic. For circumstances, a debtor could have a late cost from 2018 that is impressive. However, in order to get approved for this choice under the IFR, the servicer will have to concur to waive that charge.

ABA believes that requiring the waiver of any quantities that were accumulated or evaluated pre-COVID is unreasonable, arbitrary, and will likely serve as a substantial deterrent to offering a deferral strategy. ABA advises the Bureau to clarify that the waiver uses just to quantities accumulated or examined as a result of a payment that was not paid because of a monetary hardship due, straight or indirectly, to the COVID-19 emergency situation.

Additionally, the expression “comparable charges” in the IFR is ambiguous and is producing substantial confusion in the industry. ABA asks the Bureau to think about eliminating this expression or, in the alternative, clarify it. ABA presumes that the Bureau did not intend for this arrangement to require servicers to waive 3rd party costs that are usually permitted to be passed onto borrowers-expenses such as residential or commercial property assessment costs, residential or commercial property conservation fees, foreclosure lawyer charges, and the like. At a minimum, ABA respectfully demands that the Bureau consider clarifying that the provision does not cover these kinds of expenses/charges.

ABA Responses to Specific Requests for Comment:

The Bureau is particularly interested in whether the amendments appropriately stabilize 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 procedure, such as securities from foreclosure.

ABA believes that the Bureau has properly balanced consumer defense and operational performance. ABA agrees with the Bureau’s evaluation that extra flexibilities are proper throughout the extraordinary situations provided by the COVID-19 emergency. The streamlined application treatments stated in the IFR aid make sure that servicers have the resources to attend to the remarkably a great deal of debtors that will leave forbearances in the coming months. The rule effectively stabilizes these structured processes with consumer securities. The special payment deferment programs advanced by the Federal Housing Finance Agency (FHFA) and other entities will permit qualified debtors to prevent the threat of losing their homes, and permit them to resume repaying their mortgage loans without sustaining a delinquency or extra fees or interest, and the programs provide alternatives on how to pay back the forborne quantity that servicers have actually delayed. This interim rule ensures that the customer advantages and securities intended by these nationwide programs are effectively guaranteed as a condition to any regulatory advantages supplied.

The Bureau also seeks discuss whether to require written disclosures for this, or any comparable exceptions that the Bureau may authorize in the future.

Most loan providers memorialize the deal with an offer letter to the borrower. This letter is an easy and succinct verification of the loss mitigation service and testimony that the payments deferred will result in the forborne amounts being due at re-finance, sale, or payoff of the loan. ABA would not suggest a short-term deal disclosure as an additional requirement during catastrophes or emergency situations. This requirement would increase the problem and slow the relief the servicer is offering to their borrowers. In addition, it may puzzle the customer with unneeded forms at a demanding point in the procedure.

The Bureau likewise seeks discuss whether the Bureau ought to extend the exception established in new § 1024.41(c)( 3 )(v) to other post-forbearance loss mitigation alternatives offered to borrowers affected by other kinds of catastrophes and emergency situations.

ABA thinks the advantages managed under this IFR must be expanded to other post-forbearance loss mitigation options developed to alleviate COVID-affected debtors and also to borrowers affected by other types of catastrophes and emergencies. The VA, USDA and FHA use practical loan modification alternatives, such as simplify modifications, that are not covered under this exemption, too other Fannie Mae and Freddie Mac loss mitigation options, such as Flex Mods. We think these choices are all beneficial to the consumer and should be readily available in an efficient and structured manner throughout this emergency and other catastrophes and emergency situations.

These other modification alternatives would not qualify under the interim rule primarily due to the fact that of the restriction on interest accrual on postponed payments and the requirement that the covered amounts need to be paid back at the end of the loan term. We see no legitimate factor to exclude these valuable COVID-19 programs from the menu of options offered to customers based upon an incomplete loss mitigation application. Some debtors will not get approved for the payment deferment choices, and additional alternatives will be essential to ensure relief for all consumers.

ABA suggests that the Bureau modify the requirements under 1024.41(c)( 2 )(v)(A)( 2) so that the relief offered by the rule can be used for other kinds of loss mitigation services. This little information would significantly expand customer alternatives that are essential during the COVID-19 pandemic in addition to other catastrophes and emergency situations.

The Bureau has no reason to think that the additional flexibility provided to covered persons by this guideline would differentially affect consumers in backwoods. The Bureau requests comment regarding the effect of the modified provisions on customers in backwoods and how those effects might vary from those experienced by customers usually.

ABA does not see the need for extra versatility in the IFR for servicers in rural areas.

Conclusion:

ABA values the chance to discuss 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.