CFPB ‘no action letter’ templates issued for mortgage loss mitigation, small-dollar loan programs

Two templates that providers can use to seek “no action letters” (NALs) for use of a specific online mortgage loss mitigation application platform and for their small-dollar credit products were released Friday by the Consumer Financial Protection Bureau (CFPB).

A “no action letter” from the CFPB provides that the bureau will not bring a supervisory or enforcement action against a company for providing a product or service under certain facts and circumstances.

The specific NAL templates were released Friday under a revised NAL policy at the bureau that includes, among other things, “a more streamlined review process focusing on the consumer benefits and risks of the applicant’s product or service,” the bureau said. This revised policy also permits entities such as service providers and trade associations to secure a template that can serve as the foundation for NAL applications from companies that provide consumer financial products and services.

One of the NAL templates released Friday is for mortgage servicers that want to provide loss mitigation services, or foreclosure avoidance services, for struggling mortgage borrowers. The template, requested by Brace Software, Inc. (Brace), would enable mortgage servicers to use Brace’s online platform to implement loss-mitigation efforts for their borrowers.

The platform is an online version of the Fannie Mae Form 710, which the CFPB notes is the loss mitigation application used by most mortgage servicers. “While the Bureau does not endorse particular products or providers, digitizing the loss mitigation application process has the potential to improve a process that is experiencing an increase in loss mitigation requests from consumers due to the COVID-19 pandemic,” the agency said.

The other template is for insured depository institutions providing small-dollar credit products. The bureau said this template “includes important protections for consumers who seek small-dollar loan products.” This particular template was requested by the Bank Policy Institute (BPI) for applications by BPI members “and other deposit-taking institutions that intend to offer certain small-dollar credit products,” according to the BPI’s application.

The CFPB reminded that financial institution regulators, including the CFPB, released a statement in March encouraging financial institutions and credit unions to offer responsible small-dollar loans to their customers affected by the COVID-19 pandemic.

The bureau provided the following links to the Brace and BPI templates and NALs:

CFPB release