Treatment of Certain COVID-19 Related Loss Mitigation Options Under the Real Estate Settlement Procedures Act (RESPA) (Regulation X)
Interim final rule with request for public comment.
CFR Part: "12 CFR Part 1024"
Citation: "85 FR 39055"
Document Number: "Docket No.
Page Number: "39055"
"Rules and Regulations"
Agency: "
SUMMARY:
DATES: This interim final rule is effective on
ADDRESSES: You may submit comments, identified by Docket No.
* Federal eRulemaking Portal: http://www.regulations.gov. Follow the instructions for submitting comments.
* Email: [email protected]. Include Docket No.
* Hand Delivery/Mail/Courier: Comment Intake,
Instructions: The Bureau encourages the early submission of comments. All submissions should include the agency name and docket number for this rulemaking. Because paper mail in the
All comments, including attachments and other supporting materials, will become part of the public record and subject to public disclosure. Proprietary information or sensitive personal information, such as account numbers,
FOR FURTHER INFORMATION CONTACT:
SUPPLEMENTARY INFORMATION:
I. Summary of the Interim Final Rule Title 12 CFR part 1024 (Regulation X) generally requires servicers to obtain a complete loss-mitigation application before evaluating a mortgage borrower for a loss-mitigation option, such as a loan modification or short sale. /1/ Regulation X provides an exception from this requirement for certain short-term loss mitigation options. /2/ Due to the particular needs of mortgage servicers and borrowers during the novel coronavirus disease (COVID-19) pandemic emergency (COVID-19 emergency), the Bureau is amending Regulation X to temporarily permit mortgage servicers to offer certain loss mitigation options without obtaining a complete loss mitigation application. Servicers may offer eligible loss mitigation options to a borrower who has received a payment forbearance program made available to borrowers experiencing a financial hardship due, directly or indirectly, to the COVID-19 emergency, including one offered pursuant to section 4022 of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), /3/ or who has had other principal and interest payments that are due and unpaid as a result of a financial hardship due, directly or indirectly, to the COVID-19 emergency.
FOOTNOTE 1 Section 1024.41(b)(1) (requiring servicer to exercise reasonable diligence in obtaining documents and information to complete a loss mitigation application);
FOOTNOTE 2 12 CFR 1024.41(c)(2)(iii). END FOOTNOTE
FOOTNOTE 3 Public Law 116-136, 134 Stat. 281 (2020). END FOOTNOTE
The amendment conditions eligibility for the new exception on the loss mitigation option satisfying three criteria. First, the loss mitigation option must permit the borrower to delay paying certain amounts until the mortgage loan is refinanced, the mortgaged property is sold, the term of the mortgage loan ends, or, for a mortgage insured by FHA, the mortgage insurance terminates. These amounts include, without limitation, all principal and interest payments forborne under a payment forbearance program made available to borrowers experiencing a financial hardship due, directly or indirectly, to the COVID-19 emergency, including one made pursuant to the Coronavirus Economic Stabilization Act, section 4022 (15 U.S.C. 9056). These amounts also include, without limitation all other principal and interest payments that are due and unpaid by a borrower experiencing financial hardship due, directly or indirectly, to the COVID-19 emergency. For purposes of this criterion, the term of the mortgage loan means the term of the mortgage loan according to the obligation between the parties in effect when the borrower is offered the loss mitigation option. Second, any amounts that the borrower may delay paying through the loss mitigation option do not accrue interest; the servicer does not charge any fee in connection with the loss mitigation option; and the servicer waives all existing late charges, penalties, stop payment fees, or similar charges promptly upon the borrower's acceptance of the loss mitigation option. Third, the borrower's acceptance of the loss mitigation offer must resolve any prior delinquency. These criteria maintain important protections for borrowers and are intended to align with the COVID-19 payment deferral option announced by the
The interim final rule also excludes servicers from certain regulatory requirements if a borrower accepts an option offered pursuant to the new exception. Specifically, the interim final rule provides that the servicer is not required to continue the reasonable diligence efforts
II. Background
A. The Bureau's Regulation X Mortgage Servicing Rules
In
FOOTNOTE 4 Public Law 93-533, 88 Stat. 1724 (12 U.S.C.
FOOTNOTE 5 78 FR 10695 (
FOOTNOTE 6 Amendments to the 2013 Mortgage Rules under the Real Estate Settlement Procedures Act (Regulation X) and the Truth in Lending Act (Regulation Z), 78 FR 44686 (
FOOTNOTE 7 See generally 78 FR 10699-701. END FOOTNOTE
FOOTNOTE 8 See discussion in Chapter 3 of the 2013 RESPA Servicing Rule Assessment Report. 2013 RESPA Servicing Rule Assessment Report, https://files.consumerfinance.gov/f/documents/cfpb_mortgage-servicing-rule-assessment_report.pdf. END FOOTNOTE
FOOTNOTE 9 Mortgage Servicing Rules Under the Real Estate Settlement Procedures Act (Regulation X), 78 FR 10696, 10700 (
FOOTNOTE 10 See
The Bureau's mortgage servicing rules addressed these concerns by establishing procedures that mortgage servicers generally must follow in evaluating loss mitigation applications submitted by mortgage borrowers. /11/ Among other things, as relevant here, Regulation X generally requires servicers to obtain a complete loss-mitigation application from a borrower before offering the borrower a loss-mitigation option, such as a loan modification or short sale. /12/ Servicers generally may not offer a loss-mitigation option based upon an evaluation of any information provided in connection with an incomplete application. /13/ The loss mitigation provisions were motivated in part by concerns that some servicers were doing an inadequate job of communicating with borrowers regarding loss mitigation options, /14/ and that some servicers were unwilling to work with borrowers to reach agreement on loss mitigation options. /15/ The Bureau intended this restriction to help ensure that borrowers have a full and fair opportunity to be evaluated for loss mitigation options. /16/
FOOTNOTE 11 See generally 12 CFR 1024.41. Small servicers, as defined in Regulation Z, 12 CFR 1026.41, are generally exempt from these requirements. 12 CFR 1024.30(b)(1). END FOOTNOTE
FOOTNOTE 12 12 CFR 1024.41(b)(1) (requiring servicer to exercise reasonable diligence in obtaining documents and information to complete a loss mitigation application);
FOOTNOTE 13 12 CFR 1024.41(c)(2)(i). END FOOTNOTE
FOOTNOTE 14 78 FR at 10807. END FOOTNOTE
FOOTNOTE 15 Id. at 10814. END FOOTNOTE
FOOTNOTE 16 Id. at 10815. END FOOTNOTE
However, in issuing these requirements, the Bureau recognized that more flexible requirements may be warranted when borrowers are facing certain hardships. For example, Regulation X provides flexibility for servicers when they offer short-term payment forbearance programs or short-term repayment plans, as defined in Regulation X, based upon an evaluation of an incomplete application. /17/ In granting this flexibility, the Bureau explained that borrowers facing only temporary hardships might benefit from a more efficient application process that leads to a temporary solution without exhausting the protections under
FOOTNOTE 17 12 CFR 1024.41(c)(2)(iii); see also comments 41(c)(2)(iii)-1 and -4 (defining short-term payment forbearance program and short-term repayment plan for purposes of the regulation). END FOOTNOTE
FOOTNOTE 18 78 FR at 60400; 81 FR at 72246. Section 1024.41(i) limits the circumstances when a servicer must comply with the procedures described in
B. The CARES Act and COVID-19 Forbearances
By late
FOOTNOTE 19
On
FOOTNOTE 20 The CARES Act defines a "Federally backed mortgage loan" as any loan which is secured by a first or subordinate lien on residential real property (including individual units of condominiums and cooperatives) designed principally for the occupancy of from one-to-four families that is insured by the
FOOTNOTE 21 CARES Act section 4022(b). Upon receiving the borrower's request for forbearance, the servicer must provide a forbearance for up to 180 days with no additional documentation required other than the borrower's attestation to a financial hardship caused by the COVID-19 emergency and with no fees, penalties, or interest (beyond the amounts scheduled or calculated as if the borrower made all contractual payments on time and in full under the terms of the mortgage contract) charged to the borrower in connection with the forbearance. The servicer must extend the forbearance for up to an additional 180 days at the request of the borrower, provided that the request for an extension is made during the covered period. Note that the borrower may request that either the initial or extended forbearance period be less than 180 days. See CARES Act section 4022(b) and (c)(1). END FOOTNOTE
FOOTNOTE 22 Such programs may be based on servicers' own programs or policy initiative or may be required by State or local laws. END FOOTNOTE
On
FOOTNOTE 23 Joint Statement on Supervisory and Enforcement Practices Regarding the Mortgage Servicing Rules in Response to the COVID-19 Emergency and the CARES Act (
FOOTNOTE 24 Joint Statement, supra note 23. END FOOTNOTE
FOOTNOTE 25 Id. The Joint Statement also explained that servicers may provide multiple sequential short-term payment forbearance programs under the Regulation X mortgage servicing rules. END FOOTNOTE
FOOTNOTE 26 Comment 41(c)(2)(iii)-1 explains that a short-term payment forbearance program is a loss mitigation option pursuant to which a servicer allows a borrower to forgo making certain payments or portions of payments for a period of time. A short-term payment forbearance program for purposes of
FOOTNOTE 27 Joint Statement, supra note 23. END FOOTNOTE
By early
FOOTNOTE 28 Mortgage Bankers Ass'n, Share of Mortgage Loans in Forbearance Increases to 8.55%, https://www.mba.org/2020-press-releases/june/share-of-mortgage-loans-in-forbearance-increases-to-855. END FOOTNOTE
FOOTNOTE 29 Black
C. COVID-19 Emergency: Post-Forbearance Options and Post-Delinquency Options
The CARES Act does not specify how borrowers receiving CARES Act forbearances must repay the forborne payments. While there are good reasons for this, it creates uncertainty for stakeholders as to how borrowers must repay these amounts when CARES Act forbearances expire. As many initial forbearance periods were set at 90 days, many of them will expire in June or
The
FOOTNOTE 30 FHFA, FHFA Announces Payment Deferral as New Repayment Option for Homeowners in COVID-19 Forbearance Plans (
FOOTNOTE 31 FHFA, supra note 30. END FOOTNOTE
FOOTNOTE 32 Id. END FOOTNOTE
FOOTNOTE 33 Id. While initial forbearance under the CARES Act and similar programs probably constitute short-term payment forbearance programs under
FOOTNOTE 34 See Fannie Mae Lender Letter 2020-07, https://singlefamily.fanniemae.com/media/22916/display; Freddie Mac Bulletin 2020-15, https://guide.freddiemac.com/app/guide/bulletin/2020-15?_ga=2.76149522.621170394.1590694543-1945440177.1590694543. END FOOTNOTE
FOOTNOTE 35 See id. END FOOTNOTE
FOOTNOTE 36 See id. END FOOTNOTE
FOOTNOTE 37 See id. END FOOTNOTE
FOOTNOTE 38 HUD Mortgagee Letter 2020-06, supra note 30. END FOOTNOTE
After FHFA announced these deferral programs, industry stakeholders and consumer advocates raised concerns about whether servicers could offer an FHFA COVID-19 payment deferral using the streamlined application procedures described above without violating Regulation X's general prohibition of offering a loss mitigation option based on an evaluation of an incomplete application. /39/ The Bureau has evaluated the interaction between the FHFA payment deferral procedures and Regulation X, and engaged in informal outreach with FHFA, mortgage servicers, trade associations, consumer advocacy groups, and others. Industry stakeholders and consumer advocates urged the Bureau to take steps to ensure that servicers would not be in violation of Regulation X if they were to use the streamlined procedures.
FOOTNOTE 39 See, e.g., JDSupra, Can Mortgage Servicers Legally Offer the GSEs' COVID deferral options? (
The Bureau supports the goal of the FHFA's COVID-19 payment deferral program and certain other similar programs designed to assist borrowers experiencing financial hardships due, directly or indirectly, to the COVID-19 emergency. Through these programs, eligible borrowers can eliminate the immediate potential risk of losing their homes, resume repaying the mortgage loan with no delinquency and no additional fees or interest, and better plan how eventually to repay the forborne amount that servicers have deferred. In addition, the streamlined application procedures offered by
For these and the reasons discussed below, the Bureau is amending Regulation X to specify that servicers may offer loss mitigation options that meet certain criteria based on the evaluation of an incomplete application, and that servicers need not comply with certain other Regulation X requirements once the borrower accepts that option. These criteria are intended to align with the criteria outlined in FHFA's COVID-19 payment deferral and other comparable programs, such as FHA's COVID-19 partial claim.
The Bureau believes that this flexibility is appropriate during the COVID-19 emergency, which presents extraordinary circumstances. The Bureau will evaluate comments received under the interim final rule to determine whether it is appropriate to revise the amendments. The Bureau will also continue to monitor the market to assess consumers' experiences under these programs and the interim rule.
As part of this rulemaking, the Bureau consulted with FHFA, the Board,
III. Legal Authority
The Bureau is issuing this interim final rule pursuant to its authority under RESPA and the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act), /40/ including the authorities discussed below. This interim final rule amends a provision previously adopted by the Bureau in the 2016 Mortgage Servicing Final Rule. /41/ In doing so, the Bureau relied on one or more of the authorities discussed below, as well as other authority. The Bureau is issuing this interim final rule in reliance on the same authority and for the same reasons relied on in adopting the relevant provisions of the 2013 Mortgage Servicing Final Rule, /42/ as discussed in detail in the Legal Authority and Section-by-Section Analysis of the 2013 Mortgage Servicing Final Rule.
FOOTNOTE 40 Public Law 111-203, 124 Stat. 1376 (2010). END FOOTNOTE
FOOTNOTE 41 81 FR 72160 (
FOOTNOTE 42 78 FR 10695 (
A. Respa
Section 19(a) of RESPA, 12 U.S.C. 2617(a), authorizes the Bureau to prescribe such rules and regulations, to make such interpretations, and to grant such reasonable exemptions for classes of transactions, as may be necessary to achieve the purposes of RESPA, which include its consumer protection purposes. In addition, section 6(j)(3) of RESPA, 12 U.S.C. 2605(j)(3), authorizes the Bureau to establish any requirements necessary to carry out section 6 of RESPA, section 6(k)(1)(E) of RESPA, and 12 U.S.C. 2605(k)(1)(E), and authorizes the Bureau to prescribe regulations that are appropriate to carry out RESPA's consumer protection purposes. The consumer protection purposes of RESPA include ensuring that servicers respond to borrower requests and complaints in a timely manner and maintain and provide accurate information, helping borrowers avoid unwarranted or unnecessary costs and fees and facilitating review for foreclosure avoidance options. The amendments to Regulation X in this interim final rule are intended to achieve some or all these purposes.
B. Dodd-Frank Act
Section 1022(b)(1) of the Dodd-Frank Act, 12 U.S.C. 5512(b)(1), authorizes the Bureau to prescribe rules "as may be necessary or appropriate to enable the Bureau to administer and carry out the purposes and objectives of the Federal consumer financial laws, and to prevent evasions thereof." RESPA is a Federal consumer financial law.
IV. Administrative Procedure Act
Under the Administrative Procedure Act, /43/ notice and opportunity for public comment are not required if the Bureau for good cause finds that notice and public comment are impracticable, unnecessary, or contrary to the public interest. /44/ Similarly, publication of this interim final rule at least 30 days before its effective date is not required where the Bureau has identified good cause for a different effective date. /45/
FOOTNOTE 43 5 U.S.C.
FOOTNOTE 44 5 U.S.C. 553(b)(B). END FOOTNOTE
FOOTNOTE 45 5 U.S.C. 553(d)(3). END FOOTNOTE
The Bureau finds that prior notice and public comment are impracticable because there is insufficient time to solicit comment and finalize amendments between the FHFA's announcement of its COVID-19 payment deferral program on
Because the CARES Act does not specify how borrowers provided CARES Act forbearances will repay the forborne payments,
FOOTNOTE 46 Borrowers who are not exiting forbearance may be also be eligible for this program if their mortgage loan became delinquent resulting from a financial hardship due, directly or indirectly, to the COVID-19 emergency. Due to the rising delinquency rate discussed in part I, significant numbers of borrowers who are not exiting forbearance could be eligible. END FOOTNOTE
FOOTNOTE 47 As noted above, in the short period between the FHFA's announcement of its program and the issuance of this rule, the Bureau has consulted with stakeholders from industry, consumer groups, and regulators regarding the interaction between the FHFA's program and the servicing rules. As also noted above, industry stakeholders and consumer advocates urged the Bureau to take steps to ensure that servicers would not be in violation of Regulation X if they were to use the streamlined procedures. END FOOTNOTE
Thus, prior public comment is impractical because there is insufficient time to solicit comment and finalize amendments before FHFA's COVID-19 payment deferral programs take effect on
For similar reasons, the Bureau also finds that delaying this rulemaking to allow for prior public comment would be contrary to the public interest, because the amendments are necessary to avoid the harm to borrowers and to the housing market that would result if the amendments did not take effect on
In addition, the streamlined procedures permitted for FHFA's COVID-19 payment deferral program would minimize the burden on servicers by allowing them to offer the payment deferral program without obtaining and processing a complete application from the borrower. This is especially important during the COVID-19 emergency because servicers will be transitioning many borrowers from forbearances to longer term solutions at the same time, potentially overwhelming servicers' systems and delaying providing relief to borrowers. Indeed, the Bureau understands that servicers have already begun receiving abnormally high call volumes, beginning in
FOOTNOTE 48 See, Mortgage Bankers Ass'n, MBA Survey Shows Spike in Loans in Forbearance and Servicer Call Volume, https://www.mba.org/2020-press-releases/april/mba-survey-shows-spike-in-loans-in-forbearance-servicer-call-volume. END FOOTNOTE
For these same reasons, the Bureau also finds that there is good cause for this interim final rule to be effective less than 30 days after publication, to ensure that these amendments are in effect by the
V. Section-by-Section Analysis
Section 1024.41 Loss Mitigation Procedures
41(c) Evaluation of loss mitigation applications
41(c)(2) Incomplete loss mitigation application evaluation
41(c)(2)(i) In general
Section 1024.41(c)(2)(i) states that, in general, servicers shall not evade the requirement to evaluate a complete loss mitigation application for all loss mitigation options available to the borrower by making an offer based upon an incomplete application. /49/ Currently, the provision points to two paragraphs providing exceptions to the anti-evasion requirement,
FOOTNOTE 49 Small servicers, as defined in Regulation Z, 12 CFR 1026.41, are not subject to this requirement. 12 CFR 1024.30(b)(1). END FOOTNOTE
41(c)(2)(v) Certain COVID-19-Related Loss Mitigation Options
In general,
FOOTNOTE 50 Id. END FOOTNOTE
As discussed in part II, FHFA, FHA, and others have recently announced loss mitigation options to assist borrowers experiencing hardships related to the COVID-19 emergency in repaying amounts that accrued through forbearance or delinquency. /51/ In general, these programs permit borrowers who can resume their normal periodic payments to move the forborne or delinquent payments to the end of the mortgage loan and cure any preexisting delinquency. Under those programs, the deferred amounts must not accrue interest, servicers may not charge any fee in connection with the loss mitigation option and must waive various preexisting fees, if applicable, and servicers are permitted to offer the deferral programs to borrowers based on streamlined application procedures.
FOOTNOTE 51 FHFA, supra note 30; HUD Mortgagee Letter 2020-06, supra note 30. END FOOTNOTE
The Bureau believes that the FHFA COVID-19 payment deferral and certain similar programs would provide benefits both to borrowers and servicers during the COVID-19 emergency. Through these programs, borrowers who can resume their normal periodic payments but who cannot afford to repay the forborne or delinquent amounts in the short-term should be able to eliminate the immediate potential risk of losing their homes to foreclosure, resume repaying the mortgage loan with no delinquency and no additional fees or interest, and better plan how eventually to repay the forborne or delinquent amount that has been deferred.
In addition, the streamlined application procedures authorized by
The Bureau acknowledges that borrowers accepting a loss mitigation offer under new
FOOTNOTE 52 78 FR at 10828. END FOOTNOTE
FOOTNOTE 53 Id. END FOOTNOTE
Nonetheless, the Bureau believes that the protections set forth in new
41(c)(2)(v)(A)
New
FOOTNOTE 54 New SEC 1024.41(c)(2)(v)(A) states that "COVID-19 emergency" has the same meaning as under CARES Act section 4022(a)(1). END FOOTNOTE
Under new
The criteria in
The Bureau notes that new
New
The Bureau also notes that new
Second, for the exception to apply, new
Third, for the exception to apply, new
FOOTNOTE 55 After the borrower accepts a loss mitigation option under new
The Bureau understands that the FHFA COVID-19 payment deferral and FHA's COVID-19 partial claim, both of which are described in part II, satisfy the criteria in new
FOOTNOTE 56 Press Release, Freddie Mac Announces COVID-19 Payment Deferral (
41(c)(2)(v)(B)
New
Section 1024.41(b)(1) and (2) generally sets forth servicers' obligations upon first receiving a borrower's loss mitigation application. Section 1024.41(b)(1) generally requires a servicer to exercise reasonable diligence in obtaining documents and information to complete the loss mitigation application. Section 1024.41(b)(2) generally requires the servicer to review the application to assess completeness and provide a written notice within five days (excluding legal public holidays, Saturdays, and Sundays) stating, among other things, that the servicer has determined that the loss mitigation application is either complete or incomplete; the additional documents and information the borrower must submit to make the application complete, if applicable; a reasonable date by which the borrower should submit the additional documents and information; and a statement that the borrower should consider contacting servicers of any other mortgage loans secured by the same property to discuss available loss mitigation options.
These protections are part of a regulatory regime designed to ensure that borrowers generally receive an evaluation for all available loss mitigation options based upon a single application. As explained in the section-by-section analysis of new
Notwithstanding these important benefits, however, the Bureau believes that, in the context of a loss mitigation offer under new
FOOTNOTE 57 Mortgage Bankers Ass'n, supra note 28. END FOOTNOTE
FOOTNOTE 58 Id. END FOOTNOTE
The Bureau stresses that servicers are required to comply with
FOOTNOTE 59 12 CFR 1024.41(i). END FOOTNOTE
Additionally, servicers may be required to comply with early intervention obligations if a borrower's mortgage loan account becomes delinquent after a loss mitigation option takes effect under
FOOTNOTE 60 Small servicers, as defined in Regulation Z, 12 CFR 1026.41, are not subject to these requirements. 12 CFR 1024.30(b)(1). END FOOTNOTE
FOOTNOTE 61 See 12 CFR 1024.39(a) and (b). Also, servicers are to have policies and procedures in place to advise borrowers of all of their loss mitigation options. 12 CFR 1024.38. During the COVID-19 emergency, one of the loss mitigation options to be presented to borrowers with federally backed mortgages is their right to CARES Act forbearance. END FOOTNOTE
Further, the Bureau believes that a borrower whose mortgage loan account becomes delinquent following acceptance of a loss mitigation option under
FOOTNOTE 62 See 12 CFR 1024.41(c)(2)(iii). END FOOTNOTE
FOOTNOTE 63 The early intervention written notice is generally required no later than the 45th day of a borrower's delinquency. 12 CFR 1024.39(b). If a borrower is delinquent during a forbearance program, the servicer will likely be required to provide the written notice to the borrower. END FOOTNOTE
In light of these protections, as well as the safeguards set forth in new
VI. Request for Comment
The Bureau invites comment on this interim final rule. The Bureau is particularly interested in whether the amendments appropriately balance providing flexibility to servicers to offer relief quickly during the COVID-19 emergency with providing important protections for borrowers engaged in the loss mitigation application process, such as protections from foreclosure. The Bureau also seeks comment on whether to require written disclosures for this, or any similar exceptions that the Bureau may authorize in the future. The Bureau also seeks comment on whether the Bureau should extend the exception established in new
VII. Effective Date
This interim final rule is effective on
VIII. Dodd-Frank Act Section 1022(b) Analysis
In developing this interim final rule, the Bureau has considered the potential benefits, costs, and impacts as required by section 1022(b)(2) of the Dodd-Frank Act. /64/ In developing this interim final rule, the Bureau has consulted with appropriate Federal agencies regarding the consistency of this final rule with prudential, market, or systemic objectives administered by such agencies as required by section 1022(b)(2)(B) of the Dodd-Frank Act. /65/
FOOTNOTE 64 Specifically, section 1022(b)(2)(A) of the Dodd-Frank Act (12 U.S.C. 5512(b)(2)(A)) requires the Bureau to consider the potential benefits and costs of the regulation to consumers and covered persons, including the potential reduction of access by consumers to consumer financial products or services; the impact of the proposed rule on insured depository institutions and insured credit unions with
FOOTNOTE 65 Section 1022(b)(2)(B) of the Dodd-Frank Act (12 U.S.C. 5512(b)(2)(B)) requires that the Bureau consult with the appropriate prudential regulators or other Federal agencies prior to proposing a rule and during the comment process regarding consistency of the proposed rule with prudential, market, or systemic objectives administered by such agencies. END FOOTNOTE
The Bureau considered the benefits, costs, and impacts of this interim final rule against a baseline in which the Bureau takes no action. The baseline under this approach includes the CARES Act and the forbearances that have already been granted under the CARES Act and substantially similar programs. /66/
FOOTNOTE 66 The Bureau has discretion in any rulemaking to choose an appropriate scope of analysis with respect to potential benefits, costs, and impacts and an appropriate baseline. END FOOTNOTE
In considering the relevant potential benefits, costs, and impacts of this interim final rule, the Bureau has used feedback received to date and its knowledge of consumer financial markets. The discussion below of these potential costs, benefits, and impacts is partly qualitative, reflecting the specialized nature of the amendments. The Bureau requests comment on this discussion generally, as well as the submission of data or other information that could inform the Bureau's consideration of the potential benefits, costs, and impacts of the interim final rule.
The interim final rule's provisions generally would decrease burden incurred by industry participants and benefit consumers by providing a limited exception to the general requirement under
Exception to Regulation X anti-evasion provision allowing FHFA COVID-19 payment deferrals without a complete loss mitigation application. The interim final rule revises
As noted above,
FOOTNOTE 67 The Bureau notes as well that one of the eligibility criteria for the
FOOTNOTE 68 12 CFR 1024.41(f)(1)(i). END FOOTNOTE
Borrowers will likely benefit from the new exception to the extent that they are more able to receive a payment deferral without having to submit a complete loss mitigation application. In most cases, this will result in a reduction in the time necessary to gather required documents and information. In some cases, if borrowers would not otherwise complete a loss mitigation application and could not otherwise obtain relief with respect to the forborne or delinquent payments, the interim final rule will enable borrowers to obtain the deferral in the first place. Without a deferral, borrowers may need to repay the forborne or delinquent payments immediately. Borrowers who can do so would use savings, sell assets, or incur additional debt. Borrowers who cannot immediately repay the forborne or delinquency balances could suffer foreclosure or other negative consequences. Thus, for borrowers who obtain a deferral under the new exception, the benefit of the provision is, at a minimum, the interest on savings or asset appreciation that need not be foregone or the borrowing costs that need not be incurred. For other borrowers, the benefit of the provision is the value of preventing delinquency fees and foreclosure.
The Bureau does not have data available to predict what fraction of borrowers currently under a forbearance or delinquency related to the COVID-19 emergency would not be able to complete a loss mitigation application if required to complete the application in order to receive a deferral offer. However, the Bureau believes that in the present circumstances that percentage could be substantial due to limitations in servicer capacity. As discussed above, data from the MBA indicates that as of
Covered persons will benefit from the reduction in burden from the requirement to process complete loss mitigation applications for deferrals described in
FOOTNOTE 69 Press Release, Freddie Mac Announces COVID019 Payment Deferral (
Potential specific impacts of the interim final rule. The Bureau believes that a large fraction of depository institutions and credit unions with
With respect to servicers that are not small servicers as defined in
The Bureau has no reason to believe that the additional flexibility offered to covered persons by this interim final rule would differentially affect consumers in rural areas. The Bureau requests comment regarding the impact of the amended provisions on consumers in rural areas and how those impacts may differ from those experienced by consumers generally.
IX. Regulatory Flexibility Act Analysis
The Regulatory Flexibility Act (RFA) /70/ does not apply to a rulemaking where general notice of proposed rulemaking is not required. /71/ As noted previously, the Bureau has determined that it is unnecessary to publish a general notice of proposed rulemaking for this interim final rule. Accordingly, the RFA's requirements relating to an initial and final regulatory flexibility analysis do not apply.
FOOTNOTE 70 5 U.S.C.
FOOTNOTE 71 5 U.S.C. 603(a), 604(a). END FOOTNOTE
X. Paperwork Reduction Act
The Bureau has determined that the interim final rule does not impose any new or revise any existing recordkeeping, reporting, or disclosure requirements on covered entities or members of the public that would be collections of information requiring approval by the
FOOTNOTE 72 44 U.S.C. 3501 et seq. END FOOTNOTE
XI. Congressional Review Act
Pursuant to the Congressional Review Act, /73/ the Bureau will submit a report containing this rule and other required information to the
FOOTNOTE 73 5 U.S.C.
XII. Signing Authority
The Director of the Bureau, having reviewed and approved this document, is delegating the authority to electronically sign this document to
List of Subjects in 12 CFR Part 1024 Banking, Banks, Condominiums, Consumer protection, Credit unions, Housing, Insurance, Mortgage servicing, Mortgagees, Mortgages, National banks, Savings associations, State member banks.
Authority and Issuance
For the reasons set forth above, the Bureau amends Regulation X, 12 CFR part 1024, as set forth below:
PART 1024--REAL ESTATE SETTLEMENT PROCEDURES ACT (REGULATION X)
1. The authority citation for part 1024 continues to read as follows:
Authority: 12 U.S.C. 2603-2605, 2607, 2609, 2617, 5512, 5532, 5581.
Subpart C--Mortgage Servicing
2. Section 1024.41 is amended by revising paragraph (c)(2)(i) and adding paragraph (c)(2)(v) to read as follows:
*****
(c) * * *
(2) Incomplete loss mitigation application evaluation--(i) In general. Except as set forth in paragraphs (c)(2)(ii), (iii), and (v) of this section, a servicer shall not evade 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 upon an evaluation of any information provided by a borrower in connection with an incomplete loss mitigation application.
*****
(v) Certain COVID-19-related loss mitigation options. (A) Notwithstanding paragraph (c)(2)(i) of this section, a servicer may offer a borrower a loss mitigation option based upon evaluation of an incomplete application, provided that all of the following criteria are met:
(1) The loss mitigation option permits the borrower to delay paying covered amounts until the mortgage loan is refinanced, the mortgaged property is sold, the term of the mortgage loan ends, or, for a mortgage loan insured by the
(2) Any amounts that the borrower may delay paying as described in paragraph (c)(2)(v)(A)(1) of this section do not accrue interest; the servicer does not charge any fee in connection with the loss mitigation option; and the servicer waives all existing late charges, penalties, stop payment fees, or similar charges promptly upon the borrower's acceptance of the loss mitigation option.
(3) The borrower's acceptance of an offer made pursuant to paragraph (c)(2)(v)(A) of this section ends any pre-existing delinquency on the mortgage loan.
(B) Once the borrower accepts an offer made pursuant to paragraph (c)(2)(v)(A) of this section, the servicer is not required to comply with paragraph (b)(1) or (2) of this section with regard to any loss mitigation application the borrower submitted prior to the servicer's offer of the loss mitigation option described in paragraph (c)(2)(v)(A) of this section.
*****
Dated:
Federal Register Liaison,
[FR Doc. 2020-13853 Filed 6-29-20;
BILLING CODE 4810-AM-P
Joe Battenfeld: Supreme Court veers to left, galling Trump and Republicans
Advisor News
- Metlife study finds less than half of US workforce holistically healthy
- Invigorating client relationships with AI coaching
- SEC: Get-rich-quick influencer Tai Lopez was running a Ponzi scam
- Companies take greater interest in employee financial wellness
- Tax refund won’t do what fed says it will
More Advisor NewsAnnuity News
- The structural rise of structured products
- How next-gen pricing tech can help insurers offer better annuity products
- Continental General Acquires Block of Life Insurance, Annuity and Health Policies from State Guaranty Associations
- Lincoln reports strong life/annuity sales, executes with ‘discipline and focus’
- LIMRA launches the Lifetime Income Initiative
More Annuity NewsHealth/Employee Benefits News
- Department of Justice: Two Foreign Nationals Indicted in Chicago as Part of $10M Health Care Fraud Scheme
- Lawmakers advance Reynolds’ proposal for submitting state-based health insurance waiver
- Proposal would help small businesses afford health insurance
- Lamont proposes 'Connecticut Option' to help small businesses afford health insurance
- Colorado lawmakers target 'ghost networks' to expand access to mental health care
More Health/Employee Benefits NewsLife Insurance News