WHAT IS A FORECLOSURE SURGE?
Since the CARES Act was enacted, millions of borrowers have entered a forbearance program and millions of those borrowers are more than 90 days behind on their mortgage payments.
- Many of those borrowers are likely to still be experiencing severe hardships when their payments are to resume.
- Of the borrowers not in forbearance programs, hundreds of thousands are 90 days or more delinquent.
- Both populations of delinquent borrowers are at heightened risk of referral to foreclosure soon after the foreclosure moratoria end (foreclosure surge) if they do not resolve their delinquency or reach a loss mitigation agreement with their servicer.
The national data is scary. What does your institution’s look like?
WHAT IS THE REGULATOR’S RESPONSE TO THE SURGE?
The Consumer Financial Protection Bureau (CFPB) has responded by:
- Issuing, on April 1, 2021, Compliance Bulletin 2021-02 - Supervision and Enforcement Priorities Regarding Housing Insecurity warning mortgage servicers of a pending wave of foreclosures when the pandemic-related federal emergency mortgage protections expire this summer and fall. The surge in foreclosures will give raise to numerous compliance concerns. The CFPB has announced plans to, “use all of its tools, including regulatory initiatives, to protect homeowners…”
- Proposing changes to Regulation X, on April 5, 2021, to assist borrowers affected by the COVID-19 emergency.
- Publishing a final rule, on June 28, 2021, that completes the rule making on amendments to the federal mortgage servicing regulations (Regulation X) that:
- Establish temporary procedural safeguards to help ensure that borrowers have a meaningful opportunity to be reviewed for loss mitigation before the servicer can make the first notice or filing required for foreclosure on certain mortgages.
- Temporarily permit mortgage servicers to offer certain loan modifications made available to borrowers experiencing a COVID-19-related hardship based on the evaluation of an incomplete application.
- Finalize certain temporary amendments to the early intervention and reasonable diligence obligations that Regulation X imposes on mortgage servicers.
This two-hour webinar focuses on the provisions of the April Compliance Bulletin, the Real Estate Settlement Procedures Act (Regulation X), and related laws and regulations that protect borrowers and assure prompt and appropriate actions is taken in pending foreclosures. While not all banks are subject to the servicing provisions of Regulation X (small servicers are exempt), all banks are covered by the bulletin.
The Compliance Bulletin makes clear that all servicers, including small services, must plan for the expected increase in loans exiting forbearance programs and related loss mitigation applications. The agencies are focusing on, and therefore every financial institution must pay attention to:
- Whether servicers are providing clear and readily understandable information to borrowers about their options for payment assistance;
- 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;
- 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 application;
- Whether servicers are complying with the Equal Credit Opportunity Act’s (ECOA’s) 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;
- For applicants who are recipients of income derived from part-time employment, alimony, child support, separate maintenance payments, retirement benefits, or public assistance, whether servicers evaluate 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;
- Whether servicers promptly handle loss mitigation inquiries and avoid unreasonably long hold times on phone lines; for example, the Bureau plans to scrutinize servicer conduct where hold times are significantly longer than industry averages;
- Whether servicers maintain policies and procedures that are reasonably designed to achieve the continuity of contact objectives to ensure that delinquent borrowers receive accurate information about their loss mitigation options;
- For borrowers who submit complete loss mitigation applications, whether servicers evaluate the applications consistent with the Regulation X requirements to promote timely and consistent evaluations;
- Whether servicers comply with foreclosure restrictions in Regulation X and other Federal or State foreclosure restrictions; and
- Whether servicers are complying with the Fair Credit Reporting Act’s requirements to report the credit obligation or account appropriately.
The program is designed for loan officers, compliance officers, loan processors and clerks and auditors.