Bank, credit union regulators cease COVID-related supervisory ‘flexibility’ for mortgage servicers

Federal and state financial institution regulators on Wednesday said they were ending the flexible approach to supervision and enforcement they initiated in April 2020 regarding certain mortgage servicing timing requirements.

The agencies – the Federal Reserve Board, Consumer Financial Protection Bureau (CFPB), Federal Deposit Insurance Corp. (FDIC), National Credit Union Administration (NCUA), Office of the Comptroller of the Currency (OCC), and state regulators – issued a joint statement that this flexibility is no longer necessary given the amount of time servicers have had to adjust processes to accommodate the demands arising due to the pandemic.

About a year and a half ago, the agencies issued a joint statement addressing COVID-related mortgage forbearance, the agencies said that until further notice, they would not 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 were making good faith efforts to provide these notices and take these actions within a reasonable time.

“More than 18 months have passed since issuance of the April 2020 Joint Statement,” the agencies stated Wednesday. “While the COVID-19 pandemic continues to affect consumers and mortgage servicers, the agencies believe the temporary flexibility described in the April 2020 Joint Statement is no longer necessary because servicers have had sufficient time to adjust their operations by, among other things, taking steps to work with consumers affected by the COVID-19 pandemic and developing more robust business continuity and remote work capabilities.”

With the temporary flexibility at an end, the agencies said they “will apply their respective supervisory and enforcement authorities, where appropriate, to address any noncompliance or violations of the Regulation X mortgage servicing rules that occur after the date of issuance of this statement,” they stated. (Regulation X implements provisions of the Real Estate Settlement Procedures Act, or RESPA.)

“The agencies recognize the ongoing challenges faced by mortgage servicers and their efforts to assist customers and members affected by the ongoing COVID-19 pandemic. The agencies continue to encourage mortgage servicers to engage in these efforts,” they stated. “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. As part of their considerations, the agencies will factor in the time it takes to make operational adjustments in connection with this joint statement.”

Joint Statement on Supervisory and Enforcement Practices Regarding the Mortgage Servicing Rules in Response to the Continuing COVID-19 Pandemic and CARES Act