Joint Statement by Financial Regulators Announces Return to Standard Mortgage Servicing Rules
On April 3, 2020, the Consumer Financial Protection Bureau (CFPB), Board of Governors of the Federal Reserve System (Federal Reserve), the Federal Deposit Insurance Corporation (FDIC), the National Credit Union Administration (NCUA), the Office of the Comptroller of the Currency (OCC), and the State Banking Regulators (collectively, “the agencies”) released an emergency joint policy statement that—due to the coronavirus pandemic—they “would not take supervisory or enforcement action against mortgage servicers for failing to meet certain timing requirements under the Regulation X mortgage servicing rules as long as the servicers made good faith efforts to provide those required notices or disclosures and took the related actions within a reasonable period of time.”
Under the policy statement, agencies would not pursue any enforcement action against a mortgage servicer for (i) failing to submit an acknowledgment notice within five days of receipt of an incomplete application and (ii) delays in certain notices and the submission of annual escrow statements.
This April 2020 Joint Statement has governed, until CFPB and federal and state financial regulators announced on November 10, 2021 that the emergency policy statement will no longer govern mortgage servicing. According to the Joint Statement, the emergency statement is “no longer necessary because servicers have had sufficient time to adjust their operations by, among other things, taking steps to work with consumers affected by the COVID-19 pandemic and developing more robust business continuity and remote work capabilities.” As such, the agencies will re-institute their respective supervisory and enforcement authorities to pursue matters of noncompliance or violations of the Regulation X mortgage servicing rules.
Although the previously issued emergency statement will no longer apply, the agencies have noted that they will continue to “encourage mortgage servicers” to “assist customers and members affected by the ongoing COVID-19 pandemic.” Further, the agencies will take into consideration the timing that will be required to adjust to this change in policy.
The legal writing of JDSupra warns mortgage servicers that this policy shift is likely to result in increased regulatory scrutiny. As such, they warn that mortgage servicers should ensure that they follow the following processes:
Contacting borrowers in forbearance before the end of the forbearance period so they have time to apply for help;
Working to ensure borrowers have all necessary information and should help borrowers in obtaining documents and other information needed to evaluate the borrowers for assistance;
Addressing language access with borrowers with limited English proficiency and maintain compliance with the Equal Credit Opportunity Act and other laws;
Evaluating income fairly where servicers use income in determining eligibility for loss mitigation options;
Handling borrower inquiries promptly; and
Complying with foreclosure restrictions in Regulation X and other federal and state restrictions in order to ensure that all homeowners have an opportunity to save their homes before foreclosure is initiated.
For questions or concerns about how this policy shift could affect your financial institution, contact Kennedy Sutherland.