On April 1, 2021, the CFPB issued Compliance Bulletin 2021-02 (the “Bulletin”), warning mortgage servicers to “take all necessary steps now to prevent a wave of avoidable foreclosures this fall.” The Bulletin and associated press release cite industry data suggesting that around 1.7 million borrowers will exit COVID-related forbearances in September 2021 and the following months, many of whom will be a year or more behind on mortgage payments. With federal foreclosure moratoriums expiring at the end of June 2021, the CFPB warns that servicers will need ramped-up capacity to reach out and respond to the large number of homeowners who will need loss mitigation assistance.
The Bulletin states that as COVID-19 foreclosure moratoriums and forbearances end, the CFPB will pay particular attention to how mortgage servicers respond to borrower requests for loss mitigation assistance and process loss mitigation applications. The Bulletin urges servicers to dedicate sufficient resources and staff for these functions, to ensure they can communicate clearly with borrowers, effectively manage borrower requests for assistance, and reduce foreclosures.
The Bulletin further provides that the CFPB will focus on the following in its oversight work:
- Clear Information. Whether servicers are providing clear and readily understandable information to borrowers about their options for payment assistance.
- Proactive Outreach. Whether servicers are complying with the outreach requirements in Regulation X to ensure that borrowers are getting needed information about loss mitigation options, including:
- For borrowers who request further assistance, whether servicers are promptly resuming reasonable diligence in obtaining documents and information to complete loss mitigation applications; and
- For borrowers in forbearance, whether servicers are contacting borrowers before the end of the forbearance period to determine if the borrower wishes to complete the loss mitigation application and proceed with a full loss mitigation evaluation.
- Fair Servicing and Limited English Proficiency. Whether servicers are complying with the Equal Credit Opportunity Act (ECOA) prohibition against discriminating against any applicant with respect to any aspect of a credit transaction, including whether servicers are:
- Managing communications with Limited English Proficiency borrowers, while maintaining compliance with applicable laws; and
- For applicants who are recipients of income derived from part-time employment, alimony, child support, separate maintenance payments, retirement benefits, or public assistance, evaluating such income in accordance with the ECOA and Regulation B when determining eligibility for loss mitigation options, to the extent the servicer is otherwise required to use income in determining eligibility for loss mitigation options.
- Telephone Hold Times. Whether servicers promptly handle loss mitigation inquiries and avoiding unreasonably long hold times for telephone calls. Here, the CFPB states that it plans to scrutinize servicer practices in the event that hold times are significantly longer than industry averages.
- Continuity of Contact/SPOC. Whether servicers maintain policies and procedures that are reasonably designed to achieve the continuity of contact objectives in Regulation X, to ensure that delinquent borrowers receive accurate information about their loss mitigation options.
- Timely and Consistent Loss Mitigation Evaluations. For borrowers who submit complete loss mitigation applications, whether servicers are evaluating the applications consistent with Regulation X requirements for timely and consistent evaluations.
- Foreclosure Protections. Whether servicers are complying with the foreclosure protections in Regulation X and other Federal or State foreclosure restrictions.
- Credit Reporting. Whether servicers are complying with the Fair Credit Reporting Act’s requirements to report the credit obligation or account appropriately.
The Bulletin is effective as of April 7, 2021, the date of publication in the Federal Register.
Also of note, the Bureau’s press release about the Bulletin states that if servicers are demonstrating effectiveness in helping consumers, in accordance with the Bulletin, the CFPB will continue to evaluate servicer activity consistent with the Joint Statement on Supervisory and Enforcement Practices Regarding the Mortgage Servicing Rules in Response to the COVID-19 Emergency and the CARES Act issued on April 3, 2020 (the “Joint Statement”). As a reminder, the Joint Statement provides regulatory flexibility for various loss mitigation and other requirements under Regulation X, in light of the unique restraints and necessary measures caused by the COVID-19 emergency. Areas of flexibility include: (1) the timing of acknowledgment notices issued in connection with the offer of a CARES Act forbearance or other short-term option based on an incomplete loss mitigation application; (2) delays in issuing other required loss mitigation communications; (3) delays in engaging in live contact or issuing written early intervention notices; and (4) delays in sending annual escrow account statements.
It now appears that while the flexibility provided in the Joint Statement remains available, whether it is available to a particular servicer may depend on the servicer’s performance in meeting the Bureau’s expectations detailed in the Bulletin.