Vaccination Status of Employment Candidates

QUESTION
If you recall, I wrote you last year during the early part of the COVID-19 pandemic. Your guidance was terrific. We purchased your Business Continuity Plan, which provides a pandemic component. 

Now, it looks like the pandemic is getting worse. Our management has a policy for remote work, so most of us are sheltering in place, as needed. We go to the office two days a week. Most of us are vaccinated, too. 

But – and this is a big but! – some new hires are refusing to wear masks (let alone getting vaccinated). 

Our management requests the wearing of masks, but some of these newly hired individuals refuse and, to make matters worse, a few of them are essential to working in the office versus working remotely.

And almost all of them have admitted to being unvaccinated. 

Employees are now refusing to sit in the same room with these unmasked people. Management is confused about how to ensure our safety under these circumstances. 

So, now people will not show up at the office if management does not have a policy to protect us from unmasked and unvaccinated people – especially these new hires. 

Our management is now planning to hire a large number of employees and is actively interviewing them. These candidates may or may not support the mask and vaccination rules. We are very concerned. 

Is there something we can say or do under these circumstances? 

Can we ask candidates to wear masks and get vaccinated before they are hired? 

What can we do to avoid hiring people who insist on being unmasked and unvaccinated?

ANSWER
I understand your concerns. I think most of us do! 

Let’s be blunt: people who are “vaccine hesitant” and “against taking the vaccine” are both “anti-vaxxers.” Even when the FDA approved a vaccine, many people remained anti-vaxxers. I realize that some people are misinformed about the vaccine. Hopefully, they will act not only for themselves and their families but also for their community's benefit. 

Newly hired people who are anti-vaxxers and anti-maskers pose a significant health risk to other employees.

Our Business Continuity Plan – Checklist and Workbook does indeed include the Pandemic Response. And it’s free! Most companies then go on to the low cost purchase of our Business Continuity Plan. 

You can request information about them HERE. 

As to people being against wearing a mask, this shows that (1) they don’t understand the purpose of wearing the mask, (2) they understand the purpose and do not believe the facts, or (3) they understand the purpose and believe the facts but don’t care. When people don’t understand, they misunderstand. Then, they become the prey of unscrupulous elements in society. 

To paraphrase Jonathan Swift, you can’t reason a man out of what he never reasoned himself into! Or, as Sydney Smith once said,  “What has not been reasoned in, cannot be reasoned out.” 

To some extent, a company acts as a microcosm of the larger community environment. Management can set a standard for workplace safety, or it will eventually be compelled to do so. A company's management does not necessarily need regulatory compliance; it only needs to see that its employees are not showing up in an unsafe work environment. 

Just as there are laws against a hostile workplace, there are also regulatory mandates – such as those promulgated by OSHA – against an unsafe or hazardous workplace. 

My suggestions should be reviewed with your company’s human resources department and an attorney with expertise in labor and employment law. The recommendations may touch on employment law (state and federal), HIPPA, OSHA, ADA, EEOC laws, and so forth. 

All of these considerations reach very complex areas of the law. Consequently, you should consult with counsel to proceed carefully in effectuating any guidance concerning my suggestions. You should be guided by counsel with appropriate expertise. I am going to offer a few broad suggestions. Carrying them out requires considerable legal scrutiny.

Since your question involves candidates for hire, I will make some suggestions for your management to consider, assuming the candidates will be at-will employees.  

I will focus my remarks on the candidates for hire. 

The company may put a checkbox on the employment application that asks if the prospective employee has been vaccinated. There should be a statement that accommodation is available for bona fide religious or medical reasons, with documentation in support thereof. Checking the box certainly should not cause exclusion from employment consideration. 

However, take note, some states and localities limit what an employer can ask about vaccination status. Indeed, some states prohibit an employer from asking anything about vaccination.

A qualified candidate should comply with the company’s vaccination requirements. A written policy regarding workplace safety should include pandemic safeguards, such as a requirement to be masked and vaccinated. The policy should clearly state where and under what conditions these safety measures must be implemented. The policy should be given to all employees.

According to a company's written policy, consider that the employment offer may be made contingent on proof of vaccination. Treat the contingency in the same way that a background and credit check are completed before formal approval. Because the offer letter contains a set of contingency requirements, it may avoid the candidate alleging that rejection was based an unwillingness to get vaccinated.

If the candidate does not pass a background check, credit check, and vaccination check, there may be a basis for withdrawing the offer of employment.  

A company may have a policy that requires wearing a mask. But the candidate may reject that policy. I think such a response from a candidate should be disqualifying. But who should discuss that policy with the candidate? Certainly not the hiring manager! That is the job of human resources. 

Hiring managers should be trained in what can or cannot be discussed with a candidate. Discussing vaccination status is best left to human resources to vet the candidate after the hiring interview. The hiring manager should not discuss it. 

Jonathan Foxx, Ph.D., MBA

Chairman & Managing Director
Lenders Compliance Group

Prohibited Acts and Practices

QUESTION
Thank you for your FAQs. We get together each week for sales and compliance meetings, and your FAQs are always discussed. We find them timely, informative, and helpful. 

I want to thank you for your help in informing us about how to navigate the compliance issues associated with the pandemic. Your assistance is more needed now than ever. We have downloaded each update to your Checklist on Disaster Recovery and Business Continuity, which includes a response to the pandemic. 

Also, we purchased your comprehensive Business Continuity Plan with Pandemic Response. Our company has distributed the Checklist and Plan to all our branches and branch managers. We also train on them and keep them current. 

Do you expect to publish any updates soon, given the new surge of the virus? 

As a Chief Compliance Officer, I often wonder what a firm like yours sees regarding the common prohibited acts and practices. From your vantage point, you likely have a much wider view than I do here at my company, even with my attending training, webinars, and educational forums. I hope you would share a few precautionary tips with us to be on the lookout for them. 

What are some common prohibited acts and practices?

ANSWER
I appreciate your encouraging words regarding our Business Continuity Plan Checklist & Workbook (Includes COVID-19 Pandemic Response). 

The Checklist went through eight updates from March to November 2020. It is as good now as it was in November! However, there have been a few important regulatory issuances since then. 

The Delta variant has presented new challenges to companies, primarily concerning training and remote work. An update will be published soon. 

The Checklist is still complimentary!

• To request the Business Continuity Plan Checklist & Workbook (Includes COVID-19 Pandemic Response), please click HERE. 

With respect to the Business Continuity Plan with Pandemic Response, because it is one of our policy documents, we continually update it for changes involving legal and regulatory compliance and Best Practices. We do not just sell this policy; we work with you to ensure that you understand it and conform it to your business needs. 

• To request the Business Continuity Plan with Pandemic Response, please click HERE. 

I think you make a good point about how my firm sees much more than any single company regarding regulatory compliance issues. Whereas a Compliance Manager for a company is locked into a provincial setting, more familiar with a company’s compliance needs than the broad scope of compliance needs facing similarly situated entities, our firm sees it all. 

These days, depending on just the Compliance Manager – no matter how competent and well-resourced – is sort of like the fallacy of putting all your eggs in one basket. This form of compliance is usually risky: it is the unknown knowns that catch you! 

This is why our clients are small firms with limited internal compliance up to money center banks with large compliance departments that nevertheless retain us as their independent resource. Even the largest companies do not have the kind of panoramic vision our firm has since we deal exclusively with companies that are transactionally involved in mortgage lending and mortgage servicing. 

Our fees are low and cost-effective because we distribute our overhead across so many clients. That makes it possible for us to reduce the fees for every company, small and large. 

• For information about our compliance support, please click HERE. 

Some Common Prohibited Acts and Practices 

for Credit Secured Residential Dwellings 

The question about prohibited acts and practices necessarily leads to a broad array of possible “precautionary tips.” I could write a lengthy tome on this subject. However, I will provide some compliance concerns that are repeat offenders. 

The following list is short compared to the many compliance infractions that beset companies. 

Some items on the list result from the broad scope of view I mentioned above; meaning, we regularly caution our clients about them. 

I list the “precautionary tip” first, followed by a brief outline of the regulatory challenge.

Delayed Crediting of Payments 

A mortgage loan servicer must credit a periodic payment to the consumer’s loan account as of the date of receipt, except when a delay in crediting does not result in any charge to the consumer or in the reporting of negative information to a consumer reporting agency. 

If a servicer specifies in writing the requirements for the consumer to follow in making payments but accepts a payment that does not conform to the requirements, the servicer must credit the payment as of five days after receipt. Partial payments may be held in suspense or unapplied funds accounts. 

Late Charge “Pyramiding” 

A creditor, assignee, or servicer must not impose on the consumer any late fee or delinquency charge in connection with a payment when 

(1) the fee or charge is attributable only to the failure of the consumer to pay a late fee or delinquency charge for an earlier payment, and 

(2) the payment is otherwise a periodic payment (i.e., an amount sufficient to cover principal, interest, and escrow, if applicable, for a given billing cycle, even if the amount is not sufficient to cover late fees, or other fees, or non-escrow payments a servicer has advanced on the consumer’s behalf) received on its due date or within any applicable grace period. 

Failure to Provide Payoff Statement 

A mortgage loan servicer must not fail to provide within a reasonable time (not more than seven business days, after receiving a written request), an accurate statement of the amount currently required to pay the obligation in full as of a specified date, often referred to as a payoff statement. 

(Note: This requirement applies to a loan secured by a dwelling, whether or not the dwelling is a principal dwelling.) 

Loan Originator Compensation 

Payments may not be made to loan originators based on the terms of the transaction other than the amount of credit extended. In general, a loan originator who receives compensation directly from a consumer may not also receive compensation from someone else in connection with the same transaction (“dual compensation”). 

Steering 

Loan originators must not steer consumers to consummate a loan not in the consumer’s interest based on the fact that the loan originator will receive greater compensation for the loan. 

Loan Originator Qualification Requirements 

Loan originator organizations (that is, loan originator entities other than individuals) must make sure that their loan originators are licensed or registered under the Secure and Fair Enforcement for Mortgage Licensing Act (SAFE Act) and other applicable laws. 

For employees who are not required to be licensed, a loan originator organization must ensure that its loan originators meet character, fitness, and criminal background standards similar to SAFE Act licensing standards and provide training appropriate and consistent with the loan originators’ origination activities. 

Name and NMLSR Identification Number on Documents 

Each loan originator must include its name and NMLSR identification number on any of the following documents whenever provided to a consumer or presented to a consumer for signature-credit application, note or loan contract, and security instrument. Any loan originator without an NMLSR identification number must include its name. 

Financing of Single Premium Credit Insurance 

The financing of single premium credit insurance is prohibited. 

Negative Amortization Counseling 

First-time homebuyers who enter into transactions that may result in negative amortization must obtain counseling regarding the amortization features and provide documentation of the counseling from a HUD-approved or HUD-certified counseling organization or counselor. 

Ability to Repay 

Creditors must consider eight underwriting criteria: current income or assets, current employment, credit history, monthly mortgage payment, monthly payment for other mortgage-related obligations, monthly payment for other loans associated with the property, other debt obligations, and monthly debt-to-income ratio or residual income. 

Lenders must apply the underwriting criteria to determine whether borrowers have the ability to repay their loans based on fully indexed rates and not teaser rates. Lenders must verify the information relied on in applying the underwriting standards. 

Lenders are presumed to have complied with these ability-to-repay (ATR) requirements if they issue “qualified mortgages” (QMs) with a “safe harbor” for lower-priced (generally higher quality, prime) loans and a “rebuttable presumption” for higher-priced (generally lower quality, subprime) loans. 

Periodic Statements 

Mortgage loan servicers must provide periodic statements for any closed-end consumer credit transaction secured by a dwelling except for reverse mortgages, transactions secured by interests in timeshares, and any fixed-rate loan for which the servicer provides a coupon book that contains specified information. Small servicers are exempt from this requirement.

Jonathan Foxx, Ph.D., MBA
Chairman & Managing Director
Lenders Compliance Group

Servicing Compliance: New COVID-19 Guidelines

QUESTION
As a servicer, we are working hard to comply with the evolving servicing requirements during the pandemic. 

I am our company’s Chief Compliance Officer and General Counsel. Every time there is a regulatory change, we update procedures, and then a new round of training is done. 

As you probably know, the CFPB issued a final rule on mortgage servicing as it relates to COVID-19. 

I am looking for a brief list of the requirements in the areas of loss mitigation and early intervention. 

To assist us in training on the final rule, what should be on the list of loss mitigation and early intervention compliance with respect to COVID-19? 

ANSWER
The pandemic has caused a seismic shift in servicing guidelines regarding loss mitigation and early intervention. So, you should be focusing on these important compliance challenges. 

As I write, it appears the pandemic is entering a new and more lethal phase due to the Delta variant, a mutation that is reported to be a thousand times more transmissible than the initial COVID-19 virus. Therefore, although the Final Rule (“Rule”) was issued on June 28, 2021, there may yet be additional requirements in the future if the Delta variant wreaks havoc on the rules involving servicing compliance. 

Issued by the Consumer Financial Protection Bureau (CFPB) under the rubric 2021 Mortgage Servicing COVID-19 Final Rule, the Rule amends certain aspects of Regulation X’s mortgage servicing loss mitigation and early intervention requirements. 

The Rule also establishes procedural safeguards for mortgage servicers that help borrowers explore foreclosure alternatives, such as loan modifications or home sales. The rule is effective August 31, 2021. 

I would zero in on three aspects of loss mitigation: temporary COVID-19 safeguards; COVID-19-related loan modifications; and reasonable diligence related to COVID-19. 

As you’ve requested, I will suggest a list, but be sure to provide a deep understanding of implementation, process flow, monitoring, and testing. Construct your training in sections, as I’ve enunciated in my response. 

Loss Mitigation: Temporary Special COVID-19 Procedures Safeguards 

Currently, the mortgage servicing compliance prohibits servicers from making a foreclosure referral or completing specific foreclosure actions in certain circumstances. Generally, a servicer may not make a foreclosure referral until the borrower is more than 120 days delinquent. 

Additionally, if a borrower submits a complete loss mitigation application before the foreclosure referral, generally, the servicer must wait an additional period before initiating foreclosure to satisfy certain conditions to allow the borrower an opportunity to pursue loss mitigation. Indeed, the servicer must determine that the borrower (1) is not eligible for any loss mitigation options and notify the borrower of such; and (2) has exhausted the appeal process. 

If a loss mitigation offer is made, the borrower must reject all offered loss mitigation options or fail to perform under a loss mitigation option agreement. Similarly, if a borrower submits a complete application after foreclosure referral but at least 37 days before the foreclosure sale, the servicer must not complete certain foreclosure actions until these foreclosure protection conditions are met. 

The Rule temporarily adds to the foreclosure protection conditions in certain circumstances. 

From August 31, 2021, through December 31, 2021, unless an exception applies, before referring certain 120-day delinquent accounts for foreclosure, the servicer must ensure that at least one of the temporary procedural safeguards has been met. 

1. The borrower was evaluated based on a complete loss mitigation application, and existing foreclosure protection conditions are met. To meet this safeguard, the servicer must confirm that: 

·        The borrower submitted a complete loss mitigation application, and the servicer evaluated the application. 

·        The borrower remained delinquent since the submission of the loss mitigation application. 

·        The foreclosure protection conditions in existing servicing compliance are met, such that a servicer is permitted by the rules to make a foreclosure referral. 

2. The property is abandoned. To meet this safeguard, applicable state or local law must consider the property securing the mortgage abandoned when referred to foreclosure. 

3. The borrower is unresponsive to servicer outreach. To meet this safeguard, the servicer must not have received any communications from the borrower in the 90 days prior to the foreclosure referral, and the servicer must confirm that: 

·        It has complied with the early intervention live contact requirements in servicing compliance during that 90-day period. 

·        It has provided the early intervention 45-day written notice required by servicing compliance. The servicer must have sent the notice at least 10 but no more than 45 days before the foreclosure referral. 

·        It has complied with all loss mitigation notice requirements in servicing compliance during that 90-day period, such as the notice of an incomplete loss mitigation application. 

·        The borrower’s forbearance program, if applicable, ended at least 30 days before the foreclosure referral. 

Exceptions. 

Temporary procedural safeguards are not required if: 

·        The foreclosure referral occurs (as permitted by applicable law) on or after January 1, 2022. 

·        The borrower was more than 120 days delinquent prior to March 1, 2020. 

·        The applicable statute of limitations will expire before January 1, 2022. 

Loss Mitigation: COVID-19-Related Streamlined Loan Modifications 

Servicing compliance generally prohibits the servicer from evading the requirement to evaluate a complete loss mitigation application for all loss mitigation options available to the borrower by offering a loss mitigation option based on the evaluation of any information provided by a borrower in connection with an incomplete loss mitigation application. However, the rules do offer certain exceptions to this general prohibition, allowing some loss mitigation offers that are not based on evaluating a complete application, such as offers of specific short-term payment forbearance programs and certain COVID-19-related loss mitigation options. 

The Rule adds a new exception: it permits servicers to offer certain COVID-19-related loan modification options based on evaluating an incomplete application. To qualify for this exception, the loan modification program must: 

1. Limit loan term extensions. The loan modification must not extend the loan term more than 40 years from the date the modification is effective. 

2. Limit periodic payment increases. The loan modification must not increase the borrower’s monthly principal and interest payment beyond the amount that was required prior to the modification. 

3. Prohibit interest accrual on delayed amounts. If the loan modification allows the borrower to delay payment of any portion of the amount owed until the property is sold, the mortgage is refinanced, the modification matures, or, for Federal Housing Administration (FHA) insured loans, until the mortgage insurance terminates, then the loan modification must not allow interest to accrue on those amounts. Such amounts could include, for example, forborne periodic payments. 

4. Be available to borrowers with COVID-19-related hardships.

5. End (or be designed to end) preexisting delinquency. The loan modification must end any preexisting delinquency when the borrower accepts the modification offer. If a trial period applies, the loan modification must be designed to end any preexisting delinquency when the borrower satisfactorily completes any trial period requirements and accepts the permanent loan modification. 

6. Not include certain fees. The servicer must not charge fees in connection with the loan modification and must promptly waive certain existing fees the borrower owes, such as late fees, penalties, or stop-payment fees, that were incurred on or after March 1, 2020. 

Loss Mitigation: COVID-19-Related Reasonable Diligence 

Under the Rule, if a borrower is in a short-term payment forbearance program made available to borrowers with a COVID-19-related hardship and that program was offered based on an evaluation of an incomplete application, the rule specifies more precisely when the servicer must renew reasonable diligence efforts. For such borrowers, if the borrower remains delinquent, the servicer is required to contact the borrower no later than 30 days before the scheduled end of the forbearance period to determine if they wish to complete the loss mitigation application. If the borrower chooses to do so, the servicer must reinstate reasonable diligence efforts to complete the loss mitigation application before the end of the forbearance period. 

Early Intervention 

Turning now to early intervention, “live contact” comes under regulatory scrutiny. Be sure to monitor staff involved in “live contact information,” possibly using Call Calibration and overseeing any online interactions. Don’t mess up in this area, as dealing with the public can quickly spiral into regulatory, administrative action! 

Early Intervention: Additional Temporary COVID-19-Related Live Contact Information 

Currently, servicing compliance requires a servicer to make good faith efforts to establish live contact with delinquent borrowers no later than the borrower’s 36th day of delinquency and again no later than 36 days after each payment due date so long as the borrower remains delinquent. 

Promptly after establishing live contact, the servicer must inform the borrower about the availability of loss mitigation options, although it has discretion to determine if providing this information is appropriate and the level of specificity provided. 

Separately, servicers are also required to maintain policies and procedures that, among other things, ensure that the servicer’s personnel assigned to a delinquent borrower can identify all loss mitigation options available from the owner or assignee of the borrower’s mortgage as well as the actions the borrower must take to be evaluated for those options. The policies and procedures must ensure that the servicer has the ability to provide that information accurately. 

After establishing live contact under existing servicing compliance guidelines, the Rule temporarily requires a servicer to provide some delinquent borrowers with specific, additional information. The responsive action should be prompt. This requirement applies only until October 1, 2022. 

In particular, there are two categories relating to forbearance: borrowers who are not in forbearance and borrowers who are in forbearance. 

Borrowers not in forbearance 

For borrowers who are not in a forbearance program at the time live contact is established under the existing rules, if the owner or assignee of the mortgage provides forbearance programs for borrowers with a COVID-19-related hardship (as defined in the Rule), then promptly after establishing live contact, the servicer must inform the borrower of the following: 

·        Program availability statement 

·        List and description of applicable programs 

·        Homeownership counseling services 

Borrowers in forbearance 

For borrowers in a forbearance program made available to those experiencing a COVID-19-related hardship at the time live contact is established, the servicer must provide additional information during the live contact that occurs 10 to 45 days before the scheduled end of the borrower’s program. When live contact is established, the servicer must inform the borrower of the: 

·        Scheduled end date 

·        List and description of applicable programs 

·        Homeownership counseling services 

Jonathan Foxx, Ph.D., MBA
Chairman & Managing Director
Lenders Compliance Group

Mortgage Forbearance Complaints

QUESTION
In the last few months, we have had an increase in consumer complaints. Most of them have to do with issues at our servicing department. However, we get complaints about our loan originating department, too. 

Our complaint log for the originations department is small compared to the one for our servicing department. We want your firm to conduct an internal audit of our servicing department. I spoke with your representatives, and they sent me helpful material. We’re scheduling you for September. 

We would like to know more about the types of complaints that involve mortgage servicing. Our servicing manager is particularly interested in learning about forbearance complaints. 

So, what kind of forbearance complaints are typical in servicing these days? 

ANSWER
Complaints relating to mortgage servicing have been increasing. What your question does not mention is the effect of the pandemic on triggering consumer complaints involving servicing. The pandemic was declared a national emergency due to COVID-19. The CFPB issued legislative and policy responses aimed at assisting mortgage borrowers. Given the toll that the pandemic took on people’s financial stability, it should come as no shock that high on the list of complaints is the forbearance issue.[i] 

There were 2.7 million borrowers in active forbearance as of January 2021. Many of these borrowers had been in forbearance for more than a year.[ii] As of April 2021, a good portion of those borrowers have missed three months' payments.[iii] 

I will offer a response based on my firm’s experience providing servicing compliance support as well as the Bureau’s recent Complaint Bulletin in May 2021. The CFPB found[iv] that four significant statistics reflect the huge number of complaints. These are: 

1. The volume of overall mortgage complaints increased to more than 3,400 complaints in March 2021 – the highest monthly mortgage complaint volume in nearly three years. 

2. Some consumers experience various communication issues related to forbearance plans and options available at the end of these plans. 

3. Some consumers described confusion with mandatory account notices. 

4. Some consumers reported long delays in modifying their loans to address forborne payments. 

The range of complaints includes such issues as applying for a mortgage or refinancing an existing mortgage; closing on a mortgage; problems with a credit or consumer report; struggling to pay the mortgage; and trouble during the payment process. The most common issue reported since January 2020 has been the difficulties encountered during the payment process. 

Indeed, the number of borrowers delinquent on their mortgage has doubled since the beginning of the pandemic.[v] By “delinquent” is meant borrowers who are behind on their scheduled payments. Many of these borrowers are in forbearance and are reported as current on their credit reports vis-à-vis the CARES Act. 

Furthermore, although the number of borrowers struggling to pay their mortgage increased in March and April 2020, the number decreased in the following months. It picked up again in 2021 and has just regained pre-pandemic levels. 

According to the CFPB, it received approximately 38,100 mortgages (origination and servicing) complaints from January 1, 2020 through March 31, 2021. This is around 5% of all complaints the CFPB received during this period. Mortgage complaint volume has averaged about 2,500 per month since January 2020. But in March 2021, the volume of mortgage complaints spiked 36% to more than 3,400, which appears to be the highest such volume to date. 

Take a look at this chart. 

Mortgage Complaint Volume

Indexed by Month[vi]

 

To put the chart in perspective, the decreases may be explained, in part, by relief provided by the CARES Act, which was effective in March 2020.[vii] I will not provide all the ways the CARES Act addressed forbearance concerns; however, a few relevant areas include such assistance as requiring only an attestation of hardship due to COVID-19, which permitted borrowers to obtain relief quickly; homeowners with an eligible mortgage who had experienced financial hardship due to the pandemic had the right to request and obtain forbearance on their mortgage for up to 180 days; and, homeowners had the right to request and obtain an extension for up to another 180 days (for a total of up to 360 days). 

In February 2021, the Federal Housing Finance Agency (FHFA), Federal Housing Administration (FHA), Department of Veterans Affairs (VA), and Department of Agriculture (USDA) announced they were expanding their forbearance programs beyond the minimum required by the CARES Act for a maximum of up to 18 months of forbearance for borrowers who requested additional forbearance by a date certain.[viii] 

Although the number of mortgage forbearance complaints is increasing, their share of overall mortgage complaint volume peaked at more than 20% in April 2020. Since that point, they have remained in the range of 11 to 14% of overall volume, which, according to the CFPB, suggests that several issues are contributing to the increase in mortgage complaints. 

When indexed on a monthly basis, this chart shows mortgage forbearance complaints as a percentage of overall mortgage complaints. 

Mortgage Forbearance Complaints as a Share of Mortgage Complaints Overall

Indexed by Month[ix]

Concerning your question about what kind of forbearance complaint is typical in servicing these days, I would say the most usual complaint involves servicer communications with consumers. Lack of clarity in communications leads to consumer frustration, especially when the answer is relatively easy for the servicer to provide, such as informing consumers about when their forbearance period ended, what would happen to forborne payments, and if the forbearance period could be extended. 

Based on the review of complaints and servicers’ responses, the CFPB has taken the position that consumers would benefit from more precise communication from servicers over the phone and in writing. As the Bureau has stated, in part:

Consumers appear concerned about their forbearance plan end date and available loss mitigation options, especially options that would resolve forborne payments (e.g., deferment). Complaints also suggest that at least some consumers are anticipating the end of their forbearance plans; therefore, servicers that are proactive in communicating before the end of the forbearance period may help give consumers sufficient time to understand all available relief options and to apply for help.[x] 

Additionally, servicers must provide several written and oral notices to consumers. For instance, no later than the 36th day of delinquency, the servicer is generally required to make good faith efforts to establish live contact with the consumer to inform them of certain loss mitigation option information.[xi] Or, no later than the 45th day of delinquency, in most circumstances, the servicer is also required to provide the borrower a written notice concerning their delinquency and providing specific information about loss mitigation options.[xii] 

Consumers have expressed confusion when their monthly mortgage statement indicated that their mortgage loan account was delinquent during a forbearance period. In evaluating this challenge, the CFPB believes that “it may be helpful for servicers to more clearly communicate to borrowers about whether their mortgage loan could be considered delinquent during a forbearance plan.”[xiii] 

One other area of complaints is consistently a problem: loan modifications following a forbearance period. Complaints include long delays in servicers establishing an FHA partial claim or otherwise modifying their loan to address forborne payments. Or, delays were due to additional document requests from servicers. Other consumers reported receiving conflicting information about potential relief options that were later denied because the borrowers did not meet certain criteria. 

Finally, from the Bureau’s point of view,[xiv] I will provide several issues that servicers will have to navigate as consumers extend or exit forbearance plans. 

Those issues include: 

- Difficulty reaching a servicer representative to talk through options; 

- Needing to correct inaccurate credit information furnished about a loan in forbearance; 

- Ensuring that the principal balance is accurate after a deferral plan becomes effective; 

- Providing accurate information about loan status and relief options during forbearance; 

- Accurately communicating that no written application would be required to extend a forbearance plan; 

- Not imposing an inspection fee, late payment fee, or modification fee during a CARES Act forbearance period; and, 

- Accurately applying payments while a loan is in forbearance or while the post-forbearance review is ongoing, including after a servicing transfer. 

Be sure to review all relevant policies and procedures to ensure that they reflect the Bureau’s expectations and applicable regulatory requirements. I also suggest routinely conducting testing, training, risk assessments, servicing quality control, and internal audits. 

Jonathan Foxx, Ph.D., MBA
Chairman & Managing Director

Lenders Compliance Group

___________________________

[i] The Coronavirus Aid, Relief, and Economic Security (CARES) Act, for example, provides that homeowners with GSE and federally backed mortgages may request and obtain a forbearance for up to 180 days, and an extension for another 180 days (for a total of 360 days). Guidance from the GSEs and federal agencies allow up to 18 months of forbearance. Preventing foreclosures is a top priority. See Bulletin 2021-02: Supervision and Enforcement Priorities Regarding Housing Insecurity, CFPB, at https://files.consumerfinance.gov/f/documents/cfpb_bulletin-2021-02_supervision-and-enforcement-priorities-regarding-housing _WHcae8E.pdf
[ii] Protection for Borrowers Affected by the COVID-19 Emergency under the Real Estate Settlement Procedures Act (Act), Regulation X, FR, 12 CFR Part 1024, Bureau of Consumer Financial Protection, Proposed Rule, p. 14, et sequi
[iii] Idem p. 17
[iv] May 2021 Complaint Bulletin: Mortgage Forbearance issues described in Consumer Complaints, Consumer Financial Protection Bureau. I will be using certain graphics and some direct findings from this Bulletin.
[v] Housing Insecurity and the COVID-19 Pandemic, p. 6, March 2021, CFBP, available at https://www.consumerfinance.gov/documents/9512/cfpb_Housing_insecurity_and_the_COVID-19_pandemic.pdf
[vi] Op. cit. 4, Figure 1
[vii] 15 U.S.C. § 9056(c), Coronavirus Aid, Relief, and Economic Security (CARES) Act
[viii] See Press Release, The White House, Fact Sheet: Biden Administration Announces Extension of COVID-19 Forbearance and Foreclosure Protections for Homeowners, February 16,2021). Inter alia.
[ix] Op. cit. 4, Figure 4
[x] Op. cit. 4, p. 9
[xi] 12 CFR 1024.39(a)
[xii] 12 CFR 1024.39(b)
[xiii] Op. cit. 4, p. 10
[xiv] Op. cit. 4, p. 11

Holidays, a Time for Reflection

This year I feel a heavy heart on the holidays. My greatest heartache comes from the sadness of losing so many of our fellow Americans to the lethal COVID virus. 

And the next few months will show an increase in deaths due to COVID, possibly as much as nearly a half-million by the spring. None of us has ever experienced anything like this loss. It is so huge that my mind has a hard time contemplating its immensity. Each person who has died – some of whom I have known and loved – deserved to be with their family on these holidays. Now it cannot be.

I wrote the Business Continuity Plan Checklist & Workbook, includes COVID-19 Pandemic Response to contribute in my way to helping people to be careful, plan, accept science, set aside hubris, and protect themselves, their families, other employees, and their fellow Americans. I did not charge a fee. A publisher asked if I would sell it. How can one charge for such information that is needed in the middle of a pandemic? 

The document is now on its eighth update, last published on November 5^th, consisting of 211 pages. The ninth update will follow soon, since the federal relief plan has only just now been signed into law. The downloads have exceeded well over a thousand. Yet, I wonder if my effort was effective. I hope so. If it changed a few organizations to act responsibly, even just a few, it was well worth the effort.

We just passed Hanukkah, the Festival of Lights, a time to realize that a little hope goes a long way, like the consecrated lamp oil that was found for use to last a single day in the ancient temple, which had been destroyed; yet the oil burned for eight nights. Perhaps you can see that, against all odds, we should have faith in new beginnings. 

We just passed Christmas, on December 25^th, the date fixed in the fourth century to coincide with the winter solstice; the Eastern church celebrates it on January 7^th. It has been referred to as the Feast of the Nativity. What does Jesus symbolize if not the chance to have faith in new beginnings?

We just passed the beginning of Kwanzaa, on December 26th, the annual celebration of African-American culture dedicated to a striving for the seven principals of unity, self-determination, collective work and responsibility, cooperative economics, purpose, creativity, and faith. It celebrates the festival of "first fruits," a dedication to family, community, and culture - a time to have faith in new beginnings.

And the New Year approaches, inevitably, as a reminder that our time is finite, so we should look within to have faith in new beginnings.

These holidays are joyous but also bittersweet. Joyous because they remind us to have faith in new beginnings; bittersweet because each of them comes with a sense of having lost hope at times, ruminations about challenges that seemed too great to bear – and we reflect on what was lost along the way. 

We put down our path as we walk it. Our path is uniquely ours. Friends and family are part of our joy. We are together, but, ultimately, we are alone to face the consequences of our actions. Psalm 30:5 says, weeping may tarry in the night, but joy cometh in the morning. Let us have hope.

Many people I have spoken to seem to grasp at life continually, but I think living well is learning to let go. It seems natural to grasp, but I think letting go is the way to move from strength to strength. We don’t have to be afraid of letting go because we grow when we let go, we heal when we slough off the coils of the past.

So, for me, the holidays this year are a somber time. I will reflect. I will hug my loved ones with all my might. I will make sure I am in contact with them, too, by remote viewing.

And I will find it within myself to have faith in new beginnings.

Dear friends, clients, colleagues, and subscribers, may this holiday season fill you with faith in new beginnings. Keep open the door to your heart in memory of those who have lost so much this year due to the pandemic. 

Take good care of yourselves and loved ones, so that you stay safe and healthy. We will get beyond these challenges and find new insights to strengthen our souls. Courage.

May you all have a safe, healthy, and joyous New Year!

Best wishes,
Jonathan

Jonathan Foxx, Ph.D., MBA
Chairman & Managing Director
Lenders Compliance Group

COVID-19 Online Resources

QUESTION
We purchased your Business Continuity Plan recently. Over the last few weeks, we have been using it as a guide. We like the idea that one of the Directors spends time with us at the outset to make sure we understand the plan’s requirements. 

Now, we are building an online website for our employees to handle disaster recovery, business continuity, and pandemic issues. We want a website page with resources for all these areas, and especially we need resources for the COVID-19 challenges. 

Your Business Continuity Plan Checklist provides a huge number of resources and informative links. 

Do you have any suggested COVID-19 links that we can put on our new website?

ANSWER
Thank you for this question, as it gives me a chance to provide some additional feedback. I think you should be using - 

(A) our complimentary Checklist – Business Continuity Plan Checklist (Includes COVID-19 Pandemic Response) – along with -

(B) our inexpensive Plan – Business Continuity Plan – Disaster Recovery & Business Continuity Plan, Includes Pandemic Response. 

Taken together, they provide a considerable amount of information that will strengthen your business continuity as well as your pandemic response.

The Checklist is now 208 pages and is on Update # 7. Update # 8 will be published as soon as the next stimulus is signed into law. The Plan is available, of course, and one of our Directors does a “walkthrough” with you to answer questions and show you how to use it.

I do have some suggested resource links that, in my view, should be placed on your new website. It is a good idea to notify your visitors that a new link has been added. Keep your visitors current all the time, because the pandemic is dynamic, meaning it spreads and mutates in complex ecosystems. Today’s medical and statistical information may differ from yesterday’s analyses.

Following basic hygienic guidelines will not change: wear protective masks (viz., protect yourself and others), maintain social distancing, wash hands, avoid meetings where people are arranged closely together, stay clear of settings where aerosol transmission easily happens. 

Be alert to changes in federal and state responses to the coronavirus, as politics has unfortunately been contaminating scientifically derived guidance. That places an extra burden on your website because visitors are going there for facts, not politics; and they want reliable scientific and medically reliable resources, not controversy and opinions.

Providing online resources is a great idea. Don’t be concerned if some visitors dispute the reliability of some links. People tend toward confirmation bias, so they screen out what they don’t want to believe. Don’t be surprised if some visitors say they do not believe in science. Science is not a belief; it is not subject to faith; it does not accept unfalsifiable theories. To date, the scientific method is the best means known to humankind to validate and verify physically identifiable aspects of life. Give visitors a chance to use the links, and most of them will be grateful that your organization takes everyone’s health and welfare seriously.

The following are some online links that I suggest you consider for the COVID-19 pandemic. They run the range from statistical information to preparation and also to progress regarding treatments and vaccines.

CNN.com – Tracking COVID-19  

Coronavirus Dashboard 

Coronavirus Tracker  

COVID-19 Tracking Project

COVID World Map, The Guardian 

GlobalEpidemics.org 

Health.com – Coronavirus 

Johns Hopkins – DOVID-19 Dashboard 

StatNews.com 

Rt (Effective Reproduction Number) 

Worldometer – Coronavirus (Countries) 

Worldometer – Coronavirus (USA) 

Worldometer – Coronavirus (World) 

A word about the Rt (Effective Reproduction Number) listed above. 

Rt (Effective Reproduction Number) 

The statistic, Rt, measures how fast the virus is growing. It is the average number of people who become infected by an infectious person. If Rt is above 1.0, the virus will spread quickly. If Rt is below 1.0, the virus spread slows down and eventually stops. The idea is that it is not possible to capture the exact moment when somebody becomes infected. Instead, scientists do a sort of reverse engineering. Thus, data such as derived from testing, hospital admissions, and deaths, are used to estimate the velocity of propagation of the virus.

Mathematically, if the Rt (effective reproduction number) is greater than one (viz., >1.0), the rate of spread increases exponentially; that is, the rate of change accelerates rapidly, and the virus propagates quicker and quicker. 

Medically, this means that there are more and more infections and many more deaths involving the coronavirus and deaths related to comorbidities - the coexistence of two or more disease processes (such as heart disease, diabetes, asthma, cancer) - affected by the coronavirus infection.

Economically and logistically, any population growing exponentially must, sooner or later, encounter shortages of various resources, such as beds in ICU, availability of medications, medical staff, medical supplies, and gradual financial incapacitation. 

It is only by bringing the effective reproduction rate down that we can return to some semblance of normality. Monitor the Rt for your state, and proceed with appropriate caution and care.

Finally, I recommend that you hold periodic calls to discuss the new website, particularly emphasizing your company’s safe hygiene plans. Encourage questions and suggestions. Act as a team, as a corporate family, and you will get through the pandemic knowing that you have done all you could to ensure a safe and healthy world for you, your colleagues, and your families.

Jonathan Foxx, Ph.D., MBA

Chairman & Managing Director

Lenders Compliance Group

COVID, CARES ACT, and FCRA

QUESTION
We are involved in doing an annual update of the policy for the Fair Credit Reporting Act. During this review, we realized that we did not have a section for the CARES Act. Our compliance department provided guidance all along in implementing the requirements, but nobody had yet updated the policy itself.

We are writing to you to get some guidance on the important areas to cover in our FCRA policy with regard to the CARES Act. I realize you can’t discuss every possibility, but some general guidance would really be appreciated.

What are some important FCRA compliance areas that must be implemented in regard to the CARES Act?

ANSWER
In my view, policy documents should be reviewed annually and updated periodically as changes occur in applicable laws, rules, best practices, regulations, and implications of case law – federal and state. It seems you’re on the right track, inasmuch as you are doing an annual update, which, in this instance, helps to show the need for an additional section.

Congress enacted the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”).[i] It was a $2.2 trillion economic stimulus bill passed by the 116th U.S. Congress. It was signed into law by the President on March 27, 2020, in response to the economic challenges caused by the COVID-19 pandemic in the United States. We have outlined it at length in our complimentary Business Continuity Plan with Pandemic Response.

Thus, Congress passed the CARES Act to minimize the impact of the COVID-19 pandemic. The CARES Act places essential requirements on companies that furnish information to consumer reporting agencies about consumers affected by the COVID-19 pandemic.[ii]

Briefly described, the CARES Act initially included spending of $300 billion in one-time cash payments to individual Americans (with most single adults receiving $1,200 and families with children receiving more), $260 billion in increased unemployment benefits, the creation of the Paycheck Protection Program that provides forgivable loans to small businesses with an initial $350 billion in funding (later increased to $669 billion by subsequent legislation), $500 billion in aid for large corporations, and $339.8 billion to state and local governments. Lawmakers refer to it as Phase 3 of Congress's coronavirus response.[iii]

On April 1, 2020, the CFPB issued a document with a title worthy of a gargantuan Elizabethan treatise: 

Statement on Supervisory and Enforcement Priorities 

Regarding the Fair Credit Reporting Act

and Regulation V

in Light of the CARES Act.[iv] 

In this issuance, the CFPB sought to inform furnishers of their responsibilities under the CARES Act amendments to the Fair Credit Reporting Act (FCRA), stating that the “Bureau expects furnishers to comply with the CARES Act.” Under the CARES Act’s amendments to the FCRA, a consumer whose account was not previously delinquent is current on their loan if they have received an “accommodation” and make any payments the accommodation requires. 

Therefore, the CFPB has issued substantive guidance on consumer reporting during the COVID-19 pandemic. It issued its own FAQs to address the responsibilities companies have under the CARES Act and the Fair Credit Reporting Act (FCRA) when they furnish information to consumer reporting agencies about consumers impacted by the crisis.[v] The FAQ was meant to be a “Compliance Aid” – which is CFPB Newspeak for Consult a Compliance Professional.

Here are a few important provisions to put into the new FCRA section relating to the CARES Act. I provide some citations for you to reference in your research and policy development.

Enforcement
Furnishers must report as current certain accounts for consumers affected by the pandemic. The CFPB expects furnishers to comply with the CARES Act, and it is enforcing the FCRA, as amended by the CARES Act, and its implementing regulation, Regulation V.

Violations of the FCRA
The FCRA requires furnishers and consumer reporting agencies to conduct investigations of disputes within specified timeframes. Furnishers and consumer reporting agencies remain responsible for conducting reasonable investigations of consumer disputes in a timely fashion. CFPB expects furnishers and consumer reporting agencies to make good faith efforts to investigate disputes as quickly as possible when they are impacted by COVID-19.

Accommodations
The CARES Act addresses accommodations to consumers impacted by COVID-19. An accommodation includes any payment assistance or relief granted to a consumer who is affected by the COVID-19 pandemic during the period from January 31, 2020, until 120 days after the termination of the COVID-19 national emergency declared by the president on March 13, 2020 under the National Emergencies Act.[vi] Such an accommodation includes, for instance, agreements to defer one or more payments, make a partial payment, forbear any delinquent amounts, or modify a loan or contract.[vii]

Pandemic Accommodations
Under the CARES Act, there is a requirement that furnishers provide accommodations to consumers impacted by the pandemic. The CARES Act requires accommodations for two specific types of loans: (1) consumers with a federally backed mortgage loan (as that term is defined in the CARES Act) may obtain a forbearance from their mortgage servicer upon request, and the borrower’s attestation of a financial hardship due to the COVID-19 emergency;[viii] and (2) the CARES Act provides automatic suspension of principal and interest payments on federally held student loans through September 30, 2020.[ix]

Reporting Obligations
If the credit obligation or account was current before the accommodation, during the accommodation the furnisher must continue to report the credit obligation or account as current. If the credit obligation or account was delinquent before the accommodation, during the accommodation the furnisher cannot advance the delinquent status.

Reporting Considerations
If furnishers are reporting information about a credit obligation or account that is current, they should consider all of the trade line information they furnish that reflects a consumer’s status as current or delinquent. For instance, information that a furnisher provides about an account’s payment status, scheduled monthly payment, and the amount past due may all need to be updated to accurately reflect that a consumer’s account is current consistent with the CARES Act.[x]

Special Comment Codes
Reporting of accommodations simply by using a special comment code to report a natural or declared disaster or forbearance is not permitted. Furnishing a special comment code indicating that a consumer with an account is impacted by a disaster or that the consumer’s account is in forbearance does not provide consumer reporting agencies with the information required by the CARES Act and, therefore, furnishing such a comment code is not a substitute for complying with the requirements.

Product Line Reporting
A furnisher may want to report all of their consumers’ accounts or all of their consumers’ accounts in a particular product line as in forbearance. However, the CFPB cautions against this approach, as it may increase the risk of inaccurate reporting and customer confusion.[xi]

Reporting Delinquencies and Terminations 

The consumer reporting protections of the CARES Act continue to apply to the time period that was covered by the accommodation after the accommodation ends. Assuming payments were not required or the consumer met any payment requirements of the accommodation, a furnisher cannot report a consumer that was reported as current pursuant to the CARES Act as delinquent based on the time period covered by the accommodation after the accommodation ends. A furnisher also cannot advance the delinquency of a consumer that was maintained pursuant to the CARES Act based on the time period covered by the accommodation after the accommodation ends.

Jonathan Foxx, Ph.D., MBA
Chairman & Managing Director
Lenders Compliance Group

__________________________________________
[i] Pub. L. 116-136
[ii] The CFPB previously issued a statement informing lenders that they must comply with the credit reporting requirements of the CARES Act. The CFPB released FAQs on June 16, 2020, to “ensure that consumers receive the credit reporting protections required by the CARES Act.”
[iii] Phase 1 was an $8.3 billion bill spurring coronavirus vaccine research and development (the Coronavirus Preparedness and Response Supplemental Appropriations Act, 2020), which was enacted on March 6, 2020. Phase 2 was an approximately $104 billion package largely focused on paid sick leave and unemployment benefits for workers and families" (the Families First Coronavirus Response Act), which was enacted on March 18, 2020.
[iv] https://files.consumerfinance.gov/f/documents/cfpb_credit-reporting-policy-statement_cares-act_2020-04.pdf
[v] The FAQs can be accessed at https://files.consumerfinance.gov/f/documents/cfpb_fcra_consumer-reporting-faqs-covid-19_2020-06.pdf
[vi] CARES Act, Pub. L. 116-136, section 4021, codified at FCRA section 623(a)(1)(F)(i)(I), 15 U.S.C. 1681s-2(a)(1)(F)(i)(I)
[vii] Idem
[viii] See Joint Statement on Supervisory and Enforcement Practices Regarding the Mortgage Servicing Rules in Response to the COVID-19 Emergency and the CARES Act, April 3, 2020, CFPB, FRB, FDIC, NCUA, OCC, CSBS https://files.consumerfinance.gov/f/documents/cfpb_interagency-statement_mortgage-servicing-rules-covid-19.pdf. See also The Bureau’s Mortgage Servicing Rules FAQS related to the COVID-19 Emergency, CPFB, April 3, 2020 https://files.consumerfinance.gov/f/documents/cfpb_mortgage-servicing-rules-covid-19_faqs.pdf
[ix] For more information on the CARES Act requirement to suspend payments for Federally held student loans, see CARES Act, Pub. L. 116-136, section 3513.
[x] See FCRA section 623, 15 U.S.C. 1681s-2; 12 CFR part 1022, subpart E
[xi] Idem