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The American Bankers Association (ABA) values the chance to discuss the Consumer Financial Protection Bureau's (Bureau) interim last guideline (IFR) affecting the treatment of particular COVID-19 associated Loss Mitigation Options under RESPA and Reg. X. ABA appreciates the Bureau's understanding of the complex concerns dealing with mortgage customers and servicers throughout the COVID-19 pandemic and the Bureau's initiative to use short-term solutions that help with choices to help pandemic-affected customers. ABA thinks that the IFR supplies an efficient balance of debtor defenses and servicer versatility, which will benefit both customers and industry substantially.
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Summary of the Comment:

ABA strongly supports the IFR's provisions that modify Regulation X to permit mortgage servicers to provide momentarily particular loss mitigation options without obtaining a total loss mitigation application. These short-term accommodations will considerably help servicers by resolving regulative doubts concerning the application of Regulation X to post-forbearance procedures, and they will considerably reduce burdens related to requirements to process complete loss mitigation applications for loan deferments. Given the high volumes of loans that are presently in COVID-related forbearances, we think the benefits of this guideline are considerable.

In addition, the explanations in the IFR will get rid of numerous of the sticking around compliance uncertainties surrounding Government Sponsored Enterprise (GSE) programs that feature streamlined application procedures.2 Because other mortgage financiers and insurers have actually revealed comparable loss mitigation alternatives, and considering that additional main and secondary market entities are most likely to use GSE models as templates for their own COVID forbearance programs, we think this IFR will have a robust favorable effect on markets and consumers.

However, ABA recommends additional modifications to the IFR that will even more assist debtors and servicers during this unprecedented time and much better achieve the Bureau's goals. We go over these suggestions listed below.

Additional Recommendations:

First, 12 CFR 1024.41(c)( 2 )(v)(B) supplies that a servicer does not need to send out a loss mitigation application recommendation letter or abide by the affordable diligence responsibilities to help a customer finish an application" [o] nce the debtor accepts an offer made pursuant to" the IFR. While ABA fully supports the Bureau's objective of minimizing problems on servicers during these uncertain times and thinks this is entirely suitable under the circumstances, we do not believe the rule, as composed, will have the intended impact. Many, possibly most, of the conversations in which a servicer evaluates and offers a deferral strategy will be thought about a loss mitigation application pursuant to Regulation X, which would generally set off the requirement to send a recommendation letter within five company days. Following these discussions, servicers can not wait to see if the debtor accepts the deferral offer before determining whether it requires to please the recommendation letter requirements. Practically speaking, it would seem that the only time in which the interim final guideline would enable a servicer to pass up the acknowledgment letter requirements is if the borrower is allowed to, and in turn does, accept the deferral offer on the preliminary telephone call with the servicer. To attain what we presume to be the Bureau's intent, ABA recommends that the Bureau shift the recommendation letter timeline to 5 business days after a debtor rejects any deferment deal.

Second, in order to qualify as a deferral under the IFR, a servicer should "waive [] all existing late charges, charges, stop payment costs, or comparable charges quickly upon the debtor's approval of the loss mitigation choice." As written, it appears that servicers must waive all of these amounts, even if the charges or charges were accrued or evaluated long before the COVID-19 pandemic. For instance, a borrower might have a late cost from 2018 that is impressive. However, in order to certify for this choice under the IFR, the servicer will have to consent to waive that fee.

ABA thinks that requiring the waiver of any quantities that were accumulated or examined pre-COVID is unreasonable, arbitrary, and will likely serve as a substantial deterrent to using a deferral plan. ABA urges the Bureau to clarify that the waiver uses only to quantities accumulated or evaluated as an outcome of a payment that was not paid due to the fact that of a financial challenge due, straight or indirectly, to the COVID-19 emergency situation.

Additionally, the phrase "similar charges" in the IFR is uncertain and is producing substantial confusion in the market. ABA asks the Bureau to consider eliminating this phrase or, in the alternative, clarify it. ABA presumes that the Bureau did not plan for this provision to need servicers to waive 3rd celebration costs that are generally enabled to be passed onto borrowers-expenses such as residential or commercial property examination charges, residential or commercial property preservation costs, foreclosure attorney fees, and so on. At a minimum, ABA respectfully demands that the Bureau think about clarifying that the arrangement does not cover these kinds of expenses/charges.

ABA Responses to Specific Requests for Comment:

The Bureau is particularly interested in whether the amendments properly stabilize supplying versatility to servicers to provide relief rapidly during the COVID-19 emergency situation with supplying essential protections for debtors participated in the loss mitigation application process, such as protections from foreclosure.

ABA thinks that the Bureau has appropriately balanced consumer protection and operational efficiency. ABA concurs with the Bureau's evaluation that extra versatilities are appropriate during the remarkable circumstances presented by the COVID-19 emergency. The structured application treatments stated in the IFR aid make sure that servicers have the resources to resolve the exceptionally big number of borrowers that will exit forbearances in the coming months. The guideline properly stabilizes these streamlined processes with consumer securities. The special payment deferment programs advanced by the Federal Housing Finance Agency (FHFA) and other entities will permit qualified debtors to avoid the danger of losing their homes, and permit them to resume repaying their mortgage loans without incurring a delinquency or additional charges or interest, and the programs use options on how to repay the forborne amount that servicers have actually postponed. This interim guideline assures that the consumer benefits and protections planned by these nationwide programs are efficiently ensured as a condition to any regulative advantages supplied.

The Bureau likewise seeks talk about whether to require written disclosures for this, or any comparable exceptions that the Bureau might license in the future.

Most lending institutions memorialize the deal with a deal letter to the debtor. This letter is a basic and concise confirmation of the loss mitigation solution and testament that the payments deferred will lead to the forborne amounts being due at re-finance, sale, or payoff of the loan. ABA would not advise a short-term offer disclosure as an additional requirement during disasters or emergencies. This requirement would increase the burden and slow the relief the servicer is offering to their borrowers. In addition, it may puzzle the consumer with unwanted forms at a difficult point in the procedure.

The Bureau likewise looks for talk about whether the Bureau need to extend the exception developed in brand-new § 1024.41(c)( 3 )(v) to other post-forbearance loss mitigation alternatives made readily available to debtors impacted by other types of catastrophes and emergency situations.

ABA thinks the benefits paid for under this IFR should be broadened to other post-forbearance loss mitigation alternatives created to ease COVID-affected debtors and likewise to debtors affected by other types of catastrophes and emergencies. The VA, USDA and FHA use viable loan adjustment options, such as enhance modifications, that are not covered under this exemption, also other Fannie Mae and Freddie Mac loss mitigation solutions, such as Flex Mods. Our company believe these choices are all beneficial to the customer and must be available in an effective and structured manner throughout this emergency and other catastrophes and emergency situations.

These other adjustment options would not certify under the interim guideline mainly due to the fact that of the prohibition on interest accrual on delayed payments and the requirement that the covered quantities need to be repaid at the end of the loan term. We see no valid reason to omit these important COVID-19 programs from the menu of alternatives offered to customers based upon an insufficient loss mitigation application. Some debtors will not receive the payment deferral alternatives, and additional choices will be essential to ensure relief for all consumers.

ABA advises that the Bureau customize the requirements under 1024.41(c)( 2 )(v)(A)( 2) so that the relief offered by the guideline can be utilized for other types of loss mitigation solutions. This little explanation would substantially expand debtor options that are needed throughout the COVID-19 pandemic along with other catastrophes and emergency situations.

The Bureau has no factor to believe that the extra versatility provided to covered persons by this interim last rule would differentially impact customers in backwoods. The Bureau requests comment relating to the impact of the changed provisions on customers in backwoods and how those impacts may differ from those experienced by consumers usually.

ABA does not see the need for extra flexibility in the IFR for servicers in backwoods.

Conclusion:

ABA values the opportunity to talk about this proposition. If you have any questions about the material of this letter, please contact Sharon Whitaker at 202-663-5321 or Rod Alba at 202-663-5592.