On April 1, 2021, the CFPB issued Compliance Bulletin 2021-02 warning mortgage services of a pending wave of foreclosures when the pandemic-related federal emergency mortgage protections expire this summer and fall.
Since the CARES Act was enacted, 6.9 million borrowers have entered a forbearance program. As of January 2021, more than 2.1 million borrowers in forbearance programs were more than 90 days behind on their mortgage payments (including borrowers who have forborne three or more payments), and they could still be experiencing severe hardships when their payments are to resume. Of the borrowers not in forbearance programs, as of January 2021, around 242,000 were 90 days or more delinquent. Both populations of delinquent borrowers are at heightened risk of referral to foreclosure soon after the foreclosure moratoria end if they do not resolve their delinquency or reach a loss mitigation agreement with their servicer.
The CFPB plans to pay particular 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 bulletin is effective immediately upon publication in the Federal Register.