The American Bankers Association (ABA) appreciates the chance to comment on the Consumer Financial Protection Bureau’s (Bureau) interim final rule (IFR) impacting the treatment of specific COVID-19 related Loss Mitigation Options under RESPA and Reg. X. ABA appreciates the Bureau’s understanding of the complicated issues dealing with mortgage borrowers and servicers during the COVID-19 pandemic and the Bureau’s initiative to use short-term services that assist in servicer alternatives to help pandemic-affected customers. ABA believes that the IFR provides an effective balance of customer defenses and servicer versatility, which will benefit both customers and industry substantially.

Summary of the Comment:
reference.com
ABA highly supports the IFR’s arrangements that change Regulation X to permit mortgage servicers to offer momentarily certain loss mitigation options without obtaining a total loss mitigation application. These short-term accommodations will considerably help servicers by fixing regulatory doubts concerning the application of Regulation X to post-forbearance processes, and they will significantly decrease concerns connected with requirements to process total loss mitigation applications for loan deferments. Given the high volumes of loans that are presently in COVID-related forbearances, we think the benefits of this guideline are significant.

In addition, the explanations in the IFR will eliminate a lot of the remaining compliance uncertainties surrounding Government Sponsored Enterprise (GSE) programs that include streamlined application treatments.2 Because other mortgage financiers and insurers have revealed comparable loss mitigation alternatives, and since additional primary and secondary market entities are most likely to utilize GSE models as design templates for their own COVID forbearance programs, we believe this IFR will have a robust positive effect on markets and customers.

However, ABA advises additional changes to the IFR that will further assist customers and servicers throughout this unmatched time and much better attain the Bureau’s objectives. We talk about these recommendations listed below.

Additional Recommendations:

First, 12 CFR 1024.41©( 2 )(v)(B) supplies that a servicer does not need to send a loss mitigation application acknowledgment letter or adhere to the sensible diligence commitments to help a debtor finish an application” [o] nce the debtor accepts an offer made pursuant to” the IFR. While ABA completely supports the Bureau’s goal of minimizing burdens on servicers throughout these uncertain times and believes this is wholly suitable under the circumstances, we do not believe the rule, as written, will have the intended result. Many, perhaps most, of the conversations in which a servicer evaluates and provides a deferral plan will be considered a loss mitigation application pursuant to Regulation X, which would generally trigger the requirement to send out a recommendation letter within five organization days. Following these conversations, servicers can not wait to see if the customer accepts the deferral offer before figuring out whether it needs to please the acknowledgment letter requirements. Practically speaking, it would seem that the only time in which the interim last rule would permit a servicer to forgo the recommendation letter requirements is if the customer is allowed to, and in turn does, accept the deferral deal on the preliminary telephone call with the servicer. To attain what we presume to be the Bureau’s intent, ABA recommends that the Bureau move the acknowledgment letter timeline to five business days after a debtor declines any deferral offer.

Second, in order to qualify as a deferral under the IFR, a servicer needs to “waive [] all existing late charges, charges, stop payment charges, or comparable charges without delay upon the debtor’s approval of the loss mitigation option.” As written, it appears that servicers need to waive all of these quantities, even if the charges or charges were accrued or examined long before the COVID-19 pandemic. For circumstances, a borrower might have a late cost from 2018 that is impressive. However, in order to receive this alternative under the IFR, the servicer will have to consent to waive that charge.

ABA believes that requiring the waiver of any amounts that were accumulated or assessed pre-COVID is unreasonable, approximate, and will likely act as a considerable deterrent to offering a deferral plan. ABA urges the Bureau to clarify that the waiver applies just to quantities accrued or examined as an outcome of a payment that was not paid due to the fact that of a financial hardship due, straight or indirectly, to the COVID-19 emergency situation.

Additionally, the phrase “comparable charges” in the IFR is unclear and is producing significant confusion in the industry. ABA asks the Bureau to consider eliminating this phrase or, in the alternative, clarify it. ABA presumes that the Bureau did not mean for this arrangement to require servicers to waive third that are typically allowed to be passed onto borrowers-expenses such as residential or commercial property assessment costs, residential or commercial property preservation fees, foreclosure lawyer costs, and so forth. 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 thinking about whether the amendments appropriately stabilize providing versatility to servicers to provide relief quickly during the COVID-19 emergency with supplying important defenses for debtors participated in the loss mitigation application procedure, such as securities from foreclosure.

ABA believes that the Bureau has properly well balanced customer protection and operational performance. ABA agrees with the Bureau’s evaluation that extra flexibilities are suitable during the remarkable scenarios provided by the COVID-19 emergency situation. The streamlined application procedures set forth in the IFR help make sure that servicers have the resources to address the remarkably large number of customers that will leave forbearances in the coming months. The guideline effectively balances these structured processes with consumer defenses. The unique payment deferment programs advanced by the Federal Housing Finance Agency (FHFA) and other entities will allow qualified customers to prevent the danger of losing their homes, and enable them to resume repaying their mortgage loans without sustaining a delinquency or extra charges or interest, and the programs offer alternatives on how to pay back the forborne amount that servicers have actually postponed. This interim guideline assures that the customer advantages and defenses intended by these national programs are efficiently guaranteed as a condition to any regulatory advantages offered.

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

Most lending institutions memorialize the transaction with an offer letter to the borrower. This letter is a basic and concise confirmation of the loss mitigation service and testament that the payments delayed will result in the forborne quantities being due at refinance, sale, or benefit of the loan. ABA would not recommend a short-term deal disclosure as an extra requirement throughout disasters or emergency situations. This requirement would increase the problem and slow the relief the servicer is offering to their customers. In addition, it might confuse the consumer with unneeded kinds at a difficult point while doing so.

The Bureau likewise seeks discuss whether the Bureau should extend the exception developed in brand-new § 1024.41©( 3 )(v) to other post-forbearance loss mitigation choices provided to borrowers impacted by other types of disasters and emergencies.

ABA believes the advantages managed under this IFR must be broadened to other post-forbearance loss mitigation choices created to eliminate COVID-affected customers and likewise to borrowers affected by other types of catastrophes and emergency situations. The VA, USDA and FHA offer viable loan adjustment choices, such as enhance modifications, that are not covered under this exemption, too other Fannie Mae and Freddie Mac loss mitigation options, such as Flex Mods. Our company believe these alternatives are all advantageous to the customer and should be offered in an effective and structured way throughout this emergency and other catastrophes and emergencies.

These other adjustment choices would not qualify under the interim rule mainly because of the prohibition on interest accrual on delayed 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 omit these important COVID-19 programs from the menu of alternatives offered to customers based upon an incomplete loss mitigation application. Some borrowers will not certify for the payment deferral choices, and additional alternatives will be essential to ensure relief for all consumers.

ABA suggests that the Bureau customize the requirements under 1024.41©( 2 )(v)(A)( 2) so that the relief supplied by the guideline can be used for other kinds of loss mitigation options. This small explanation would substantially expand borrower options that are required throughout the COVID-19 pandemic as well as other disasters and emergencies.

The Bureau has no reason to believe that the extra flexibility offered to covered individuals by this interim last guideline would differentially affect consumers in backwoods. The Bureau requests comment relating to the effect of the modified provisions on customers in backwoods and how those effects might differ from those experienced by consumers generally.

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 questions about the material of this letter, please contact Sharon Whitaker at 202-663-5321 or Rod Alba at 202-663-5592.