An interim final rule that gives the green light to mortgage servicers providing forbearance relief to home owners facing hardship due to the coronavirus (COVID-19) pandemic, and allowing this based on limited information collected from borrowers, was issued Tuesday by the Consumer Financial Protection Bureau (CFPB).
The interim final rule takes effect July 1, and comments will be accepted on the measure for 45 days after its publication in the Federal Register, scheduled Wednesday.
The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) provides forbearance relief for consumers with federally backed mortgage loans, and the bureau notes that the mortgage industry has developed different options for borrowers to repay the payments that were forborne under the act. The Federal Housing Finance Agency (FHFA), Fannie Mae, and Freddie Mac may permit some borrowers to defer repayment of the forborne amounts until the end of the mortgage loan; the Federal Housing Administration (FHA) has a similar program. These programs require the servicer to collect only minimal information from the borrower before offering the option.
With certain exceptions, Regulation X (implementing the Real Estate Settlement Procedures Act, or RESPA) normally would require servicers to collect a complete loss mitigation application before making an offer, but the bureau says its interim rule “makes it clear that servicers do not violate Regulation X by offering certain COVID-19-related loss mitigation options based on an evaluation of limited application information collected from the borrower.”
The interim rule requires that the loss mitigation option meet certain criteria to qualify for an exception from the typical requirement to collect a complete application. Among other things:
- The option must allow the borrower to delay paying all principal and interest payments that were forborne or became delinquent as a result of a financial hardship due, directly or indirectly, to the COVID-19 emergency.
- Servicers may not charge any fees to borrowers in connection with the option.
- The borrower’s acceptance ends any preexisting delinquency.
The exception is not limited to payments forborne under the CARES Act, the bureau noted.
The interim final rule also provides servicers relief from certain Reg X requirements that normally would apply after a borrower submits an incomplete loss mitigation application, the bureau said. “ Once the borrower accepts an offer for an eligible program under the IFR, the servicer need not exercise reasonable diligence to obtain a complete application and need not provide the acknowledgment notice that is generally required under Regulation X when a borrower submits a loss mitigation application,” it said.
After a borrower accepts a loss mitigation offer, other Reg X requirements apply. “For example, if the borrower becomes delinquent again after accepting the offer, the servicer would have to satisfy Regulation X’s early intervention requirements,” the bureau said. “Similarly, if the servicer receives a new loss mitigation application from the borrower, the servicer would have to comply with Regulation X’s loss mitigation procedures.”
Interim final rule (notice for Federal Register)