New CFPB rules define mortgage service requirements in response to end of moratorium on covid-19 foreclosures

The Consumer Financial Protection Bureau (“CFPB”) announced post-COVID-19 mortgage management rules that came into effect on August 31, 2021 (the “rules”). The rules are designed to protect borrowers from “avoidable foreclosures” and impose new “procedural guarantees” that loan managers must follow now that the moratorium on COVID-19 foreclosures has expired. The rules remain in effect until December 31, 2021.

The new temporary provisions generally prevent a manager from re-foreclosing or completing a pending foreclosure by January 1, 2022. Unlike previous moratoria on COVID-19 foreclosures, the rules are not limited to borrower protections related to COVID-19 or the CARES Act and apply to “Federal Government Related Mortgages” (as defined in RESPA) that are secured by the borrower’s primary residence. Therefore, the new rules may apply to portfolio loans, rather than just federally guaranteed mortgages (such as Fannie Mae, Freddie Mac, FHA or VA loans), which were subject to the CARES Act. .

Early intervention live contact. When a service agent makes direct contact with a borrower, as required by the existing mortgage service rule, the service agent must provide the following information:

  • For borrowers who are not part of a forbearance plan at the time of contact, the server agent must:
    • Inform the borrower that forbearance programs are available for borrowers facing difficulties related to COVID-19;
    • Describe the forbearance programs available to the borrower and the steps the borrower must take to be appraised for the programs, unless the borrower declares that he is not interested in receiving this information; and
    • Provide the borrower with at least one way to find contact details for homeownership counseling services, for example by referring to the borrower’s periodic statement.
  • For borrowers in a forbearance plan at the time of direct contact, the manager must:
    • Let the borrower know when the borrower’s current forbearance plan is due to end;
    • Describe any available forbearance extensions, repayment options, and other loss mitigation options available to the borrower at the time of the live contact, and the actions the borrower needs to take to be assessed for those loss mitigation options. losses; and
    • Provide the borrower with at least one way to find contact details for homeownership counseling services, for example by referring to the borrower’s periodic statement.

COVID-19 Simplified Loan Modification Options. Under existing mortgage management rules, service managers are prohibited from offering a loss mitigation option based on an incomplete borrower application. However, the Rules provide new exceptions to this general prohibition. In addition to short-term abstentions or repayment plans, service agents may offer certain additional COVID-19-related loan modification options, based on an incomplete application, if the following criteria are met:

  • The modification may not extend the term of the loan by more than 40 years from the date of entry into force of the modification;
  • The modification cannot increase the monthly principal and interest payment of the borrower beyond what was required before the modification;
  • If the amendment provides for a deferral of amounts owed (i.e. until the loan maturity date, until the property is sold or the loan is refinanced), interest cannot run on the amounts carried forward;
  • The amendment is available for borrowers facing difficulties related to COVID-19;
  • The modification must terminate any pre-existing failure upon acceptance, or upon final acceptance after the completion of any applicable trial modification period; and
  • The service agent cannot charge any fees related to the loan modification and must promptly waive certain existing fees the borrower owes, which were incurred on or after March 1, 2020, such as late fees, penalties or stop payment fees.

However, if the borrower does not adhere to a test modification plan under the new exception or requests additional loss mitigation assistance, the duty officer should immediately resume due diligence efforts to help complete the Loss Mitigation Application and provide the Borrower with an updated notice, if required, providing the information necessary to complete the application.

Temporary COVID-19 lockout guarantees. The rules also require stronger lockdown protections until December 31, 2021. Until then, service providers cannot initiate a new foreclosure due to missed payments, unless one of the three guarantees has been fulfilled:

  • Comprehensive Loss Mitigation Assessment – The borrower has submitted a full loss mitigation application; has remained delinquent at all times since the filing of the application; and that the assessment process has been exhausted (including any right of appeal);
  • Abandoned property – The asset encumbering the loan is abandoned, in accordance with the laws of the state or municipality in which it is located; Where
  • Borrower who does not respond – The server agent has not received any communication from the borrower for at least 90 days before the start of the foreclosure, and all of the following conditions are met:
    • The duty officer made good faith efforts to establish direct contact with the borrower after each payment due date during this 90 day period;
    • The serving agent sent the written notice of early intervention 10 to 45 days before the serving agent made the first notice or request for foreclosure;
    • The serving agent has sent all loss mitigation notices required by 1024.41, as applicable, during the 90-day period before the serving agent makes the first notice or foreclosure request; and
    • The borrower’s forbearance program, if applicable, has ended at least 30 days before the service agent makes the first foreclosure notice or filing.

Finally, the rules add language to the commentary detailing record keeping and other requirements related to these lockout guarantees.


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