The CFPB, OCC, FDIC, NCUA, and state financial regulators issued a statement this week ending the temporary supervisory and enforcement flexibility provided to mortgage servicers due to the COVID-19 pandemic by the agencies. In April 2020, the banking agencies issued an interagency statement that relaxed supervision and enforcement of mortgage servicers' compliance with certain requirements because of constraints caused by the pandemic. For instance, the banking agencies indicated that they would not intend to take supervisory or enforcement action against mortgage servicers for delays in sending certain early intervention and loss mitigation notices and taking certain actions relating to loss mitigation set out in the mortgage servicing rules, provided that servicers are making good faith efforts to provide these notices and take these actions within a reasonable time.
But the agencies now believe that servicers have had sufficient time to adjust their operations by taking steps to work with consumers affected by the COVID-19 pandemic and developing more robust business continuity and remote work capabilities. More than 18 months have passed since the issuance of the April 2020 joint statement, and the agencies will apply their respective supervisory and enforcement authorities, when appropriate, to address any noncompliance or violations of the Regulation X mortgage servicing rules that occur after the date of their recent statement. That said, the agencies "will consider, when appropriate, the specific impact of servicers' challenges that arise due to the COVID-19 pandemic and take those issues in account when considering any supervisory and enforcement actions."
The CFPB also released a report summarizing the Bureau's mortgage servicing-related efforts during the pandemic. Among other things, the work in the report includes targeted supervisory reviews designed to obtain real-time information from mortgage services due to the elevated risk of consumer harm because of the pandemic; implementing temporary procedural safeguards to ensure that borrowers have time before foreclosure to explore their options, including loan modifications and selling their homes; and analyzing consumer complaint data about mortgage servicing and mortgage forbearances.
Putting It Into Practice: If it was not clear before, this week's statement signals a sea change for mortgage servicers and in particular their COVID responses to impacted borrowers. As mortgage lenders and servicers adjust to a post-pandemic world, the CFPB expects servicers to resolve defaults and delinquencies despite the inevitable stress on processes and procedures. To echo the CFPB's April 2020 Compliance Bulletin on pandemic-related mortgage servicing, and in the face of a growing supervisory and enforcement posture, mortgage servicers should ensure that they are:
- Contacting borrowers in forbearance before the end of the forbearance period so they have time to apply for help;
- Working to ensure borrowers have all necessary information and should help borrowers in obtaining documents and other information needed to evaluate the borrowers for assistance;
- Addressing language access with borrowers with limited English proficiency and maintain compliance with the Equal Credit Opportunity Act and other laws;
- Evaluating income fairly where servicers use income in determining eligibility for loss mitigation options;
- Handling borrower inquiries promptly; and
- Complying with foreclosure restrictions in Regulation X and other federal and state restrictions in order to ensure that all homeowners have an opportunity to save their homes before foreclosure is initiated.
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