Banking Regulators Ease Enforcement During Pandemic

Federal and state banking regulators announced Friday night that they are granting regulatory flexibility to mortgage lenders as they scramble to work with borrowers who are impacted by the coronavirus pandemic.

The policy statement is designed to clarify for lenders what regulators will enforce and what they will let slide in the short term, with 10 million Americans filing for unemployment in the last two weeks and borrowers jamming mortgage servicers’ call centers seeking assistance.

It includes flexibility on sending annual escrow account statements and filing early intervention and loss mitigation notices, as required by mortgage servicing rules.

“The actions announced today by the agencies inform servicers of the agencies’ flexible supervisory and enforcement approach during the COVID-19 pandemic regarding certain communications to consumers required by the mortgage servicing rules,” the statement said.

The joint statement was released by the Consumer Financial Protection Bureau, Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the National Credit Union Administration, the Office of the Comptroller of the Currency and the State Banking Regulators.

CARES Act

The $2 trillion CARES Act signed last week by President Trump comes with significant benefits for homeowners who are unable to make their mortgage payments, most notably a moratorium on foreclosures and the right to forbearance.

Forbearance allows borrowers with a federally backed mortgage to put off payments for at least six months if they suffer economic hardship during the pandemic. The law requires lenders to approve forbearance if requested by the borrower, touching off a scramble by homeowners as bills came due this week.

“The policy statement and guidance issued today will facilitate mortgage servicers’ ability to place consumers in short-term payment forbearance programs,” the statement said.

That includes:

Applications: Regulators will not enforce requirements that lenders obtain a complete application from the borrower before offering loan modifications, such as a CARES Act forbearance. In fact, they can offer forbearance based an incomplete application or no application at all.

In the event of an incomplete application, the rules still require lenders to provide an acknowledgement notice within five days of receipt of an incomplete application, even if the borrower has been offered or is in a short-term option.

Late Payments: Regulators also will not enforce certain loss-mitigation requirements. This includes delays in sending loss mitigation-related notices, such as the five-day acknowledgement notice, the 30-day evaluation notice and the appeals notice, so long as the lenders are making “good faith efforts to provide these notices and take the related actions within a reasonable time.”

Regulators also won’t issue enforcement actions for delays in trying to establish live contact with or sending written notice to delinquent borrowers, provided they are making good faith efforts to do so in a reasonable time. 

Escrow Statements: Regulators also won’t take enforcement actions against lenders for delays in sending annual escrow statements given the high call volume lenders are experiencing, though they have to make good faith efforts to get them out within a reasonable window of time.

The regulators said they believe the changes “will enable services to provide borrowers with timely assistance, ensure that all borrowers are treated fairly and get the assistance they need.”