We are currently servicing $8 billion. As you know, COVID has really put a lot of pressure on servicers.
ANSWER
To begin, you should understand that the proposal, if finalized, would generally add to existing Regulation X provisions to help address COVID-19-related hardships.
Given the nature and scope of the proposed rule, I will
provide a cursory summary.
For servicing compliance support, you should contact us.
Our Servicers Compliance Group will get you ready to implement the Proposed Rule.
The Consumer Financial Protection Bureau (CFPB) issued a notice of proposed rulemaking (viz., 2021 Mortgage Servicing COVID-19 Proposed Rule) to propose amendments to its Mortgage Servicing Rule that would provide additional assistance for borrowers impacted by the COVID-19 emergency ("Proposed Rule").
The Proposed Rule includes:
-Adding information that servicers would provide to certain borrowers during live contacts;
-Adding loan modification options that servicers may offer based on an incomplete loss mitigation application in certain circumstances; and,
-Establishing a temporary COVID-19 emergency-related preforeclosure review period, added to existing foreclosure protections.
Let’s dig a little deeper.
The Proposed Rule would add a definition for COVID-19-related hardship to generally mean
a financial hardship related to the COVID-19 emergency, as defined in the Coronavirus Aid, Relief, and Economic Security Act (CARES Act).
I will set forth a summary of the Proposed Rule’s amendments.
There are four paramount changes.
1) Early Intervention: Live Contact
During live contacts established under the existing Mortgage Servicing Rule requirements, the Proposed Rule would require servicers to take additional actions with certain borrowers.
For borrowers not yet in a forbearance plan at the time of live contact, if forbearance options are available to the borrower through the servicer, the servicer would be required to ask the borrower if they are experiencing a COVID-19-related hardship. If the borrower indicates they are, the servicer would be required to list and describe forbearance programs made available to that borrower. The servicer would also be required to provide the actions that the borrower must take to be evaluated for such forbearance programs.
For borrowers in a forbearance plan at the time of live contact, the servicer would be required to identify the date the borrower’s forbearance program ends and list and describe loss mitigation options made available to the borrower to resolve any delinquency the borrower will have at the end of the forbearance program. The servicer would also be required to provide the actions that the borrower must take to be evaluated for such loss mitigation options, information the servicer has under existing continuity of contact requirements. The servicer would only need to provide this information in the last live contact required under the existing rule that occurs prior to the end of the forbearance period.
This proposed provision is temporary. If finalized, it would only apply until August 31, 2022, one year after the proposed effective date.
2) Loss Mitigation Procedures: Reasonable Diligence
Under the existing rule’s reasonable diligence obligations for servicers in obtaining a complete loss mitigation application, the Proposed Rule would clarify when the servicer must perform reasonable diligence requirements for borrowers in a short-term payment forbearance program made available to borrowers experiencing a COVID-19-related hardship.
For those borrowers, if the short-term payment forbearance program was offered based on the evaluation of an incomplete application, then, no later than 30 days before the end of the short-term payment forbearance program, the servicer would be required to contact the borrower and determine if the borrower wants to complete their loss mitigation application and proceed with a full loss mitigation evaluation.
If the borrower requests further
assistance, the servicer would be required to exercise reasonable diligence to
complete the application before the end of the forbearance program.
3) Loss Mitigation
Procedures: Evaluation of a Loss Mitigation Application
The Proposed Rule would add
another exception to the existing rule’s prohibition on offering a loss
mitigation option based on an evaluation of an incomplete loss mitigation
application. A servicer would be allowed to offer certain loan modifications
based on the evaluation of an incomplete application if certain criteria are
met.
Those criteria include:
-The loan modification would extend the term of the loan by no more than 480 months and would not result in an increase to the borrower’s periodic principal and interest payment.
-If the loan modification allows a deferral of amounts until certain points, such as when the loan is refinanced or the property is sold, the amounts would not accrue interest; the servicer would not charge a fee connected to the loan modification; and certain existing charges owed by the borrower, such as late fees and stop payment fees, would be waived by the servicer upon acceptance of the loan modification.
-The loan modification must be made available to borrowers experiencing a COVID-19-related hardship, as that term is defined in the proposal.
-The borrower’s preexisting delinquency would be resolved by acceptance of the loan modification (and potential completion of a trial loan modification first, if required by the servicer).
If the borrower accepts a loan modification as described in the Proposed Rule, the acceptance would terminate the servicer’s obligation to exercise reasonable diligence to complete any loss mitigation application the borrower submitted prior to the borrower’s acceptance of an offer made under the proposed exception. It would also terminate the servicer’s obligation to review such an application under the existing rule requirements.
he obligation to exercise reasonable diligence to
complete any loss mitigation application the borrower submitted prior to the
borrower’s acceptance of an offer made under the proposed exception would
restart if the borrower fails to perform under any required trial loan
modification or if the borrower requests further assistance.
4) Loss Mitigation Procedures: Prohibition on
Foreclosure Referral
