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NAMFS appreciates the opportunity to submit comments regarding the
These entities have been negatively impacted financially from the extended moratoriums, directly and indirectly affecting thousands of jobs. Our organization has been supportive of the actions the Bureau has taken prior to this latest proposal. We urge the Bureau to consider the recommendations below, which we feel balance the benefit to the economy while still accomplishing the Bureau's goals.
Pre-Pandemic Delinquent Borrowers
Foreclosures were at historically low volumes when the Covid-19 national emergency was declared in
Recommendation: Exclude pre-pandemic defaults from the proposed Reg X actions apart from those that have entered loss mitigation prior to the current moratorium expiration of
Borrowers Unaffected by Covid-19, directly or indirectly
As previously stated, extending protections to borrowers who have not been affected by the virus, directly or indirectly does not advance the Bureau's mission and, in fact, is counterproductive because it sends the wrong message, rewards bad behavior and diverts resources from where they are truly needed. This fact has already been acknowledged by both
Recommendation(s): Exclude borrowers that cannot demonstrate financial hardship related to the pandemic and amend the definition of "financial hardship" as contained in section 1024.31 to the following:
Financial Hardship shall be defined as applying to those that can demonstrate a financial loss from 2019 to 2020 in an amount greater than 10% for those making less than
Reverse Mortgages where the borrower is deceased
For reverse mortgages, where the borrower is deceased, the default cannot be cured. Thus, these reverse mortgages fall into two categories: a) situations where the heirs/estate want to sell the property, which they can easily do in the existing home sale market and b) situations where there are no heirs or estate, or the heirs do not want the property. In the first situation, the heirs are granted at least 6 months after the death of the borrower to pay the loan in full and most estates have no interest in remaining open longer than they need to be open. Thus, extending the moratorium on these loans is not needed. In the second situation, the delay in foreclosure is oftentimes a burden on the heirs and/or neighbors who feel compelled to maintain the property, pay taxes and pay HOA dues. At the same time, the servicer is continuing to pay for inspections and winterizations on a property that is likely upside down. Allowing such properties to sit and languish is a lose-lose proposition for all parties involved along with the loss of potential inventory and how this can impact overall affordability.
Recommendation: Exclude reverse mortgages where the borrower is deceased.
Borrowers Who are Unresponsive to Servicer Outreach
An often ignored or misunderstood fact is that many borrowers will simply bury their heads until there is a foreclosure action pending, at which time such borrowers finally initiate contact. One lesson learned during the Great Recession and that is currently playing out today is that delinquent borrowers are far more likely to contact their servicer when some type of action is being taken. During the moratoriums and as part of the guidance provided to avoid negatively impacting borrowers, many servicers have not ordered inspections of properties that are in forbearance. In a delinquent situation and based on the state of the mortgage, our association members may be asked to contact the borrower as part of their inspection of the property to ensure compliance with the investor/insurer guidelines (HUD,
Recommendation: Exclude all unresponsive borrowers from the Bureau's proposal. However, once a delinquent borrower makes contact, an automatic 90-day loss mitigation hold must be placed on that loan. If the borrower is, in good faith, attempting to obtain a positive loss mitigation result, another 90- day hold must be placed on the loan. All such borrowers are still subject to the proposed definition of "Financial Hardship" listed in recommendation 2.
Data Does Not Support Potential Surge of Foreclosures
The Bureau refers to the possibility of "millions of foreclosures" if the moratorium is not extended. However, the data contradicts those numbers. A recent report predicts 500,000- 700,000 foreclosures once the moratoriums end.
Additionally, the housing market and home affordability could benefit as inventory will be created. People that do get foreclosed upon in most cases should be able to sell their home prior to the foreclosure sale. The sale in the current market may also result in their walking away with equity as RealtyTrac reports that 80% of homes have at least 20% equity. While not ideal, this is certainly a more viable strategy today than the 2008 Housing Crisis and does not mean that a foreclosure will result in homelessness.
ATTOM Data Solutions recently released a report showing that the average foreclosure timeline is significantly elevated (857 days) (https://www.attomdata.com/news/market-trends/foreclosures/attom-datasolutions2020-year-end-u-s-foreclosure-market-report/). The fact is that delinquent borrowers will have ample opportunity to access the equity in their homes. Unlike the Great Recession, there will not be a "wave" of foreclosure sales, but instead an easing of the current housing market, providing most a perfect opportunity to move into something more affordable. Those that will not have such financial stability upon exiting are the homeowners that the Bureau can focus its full resources upon.
Constitutionality of Actions
NAMFS has had several conversations with other legal trade associations that believe that there may be questions on the constitutionality of the actions taken. As a point of reference, we would point to recent court decisions as it relates to the
NAMFS appreciates the Bureau's interest in receiving public comment. We thank the Bureau for consideration of our comments and recommendations.
NAMFS - Executive Director
888-292-6831 ext. 1
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The proposed rule can be viewed at: https://www.regulations.gov/document/CFPB-2021-0006-0001
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