John Zasada, Compliance Consulting Director, Financial Institutions Group

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”) issued a joint statement and Frequently Asked Questions (FAQs) on the Mortgage Servicing Rules in response to the pandemic and the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). The CARES Act permits borrowers experiencing a financial hardship due, directly or indirectly, to the COVID-19 emergency, to request a forbearance by submitting a request to their mortgage servicer and affirming they are experiencing a financial hardship during the COVID-19 emergency. Servicers must provide a CARES Act forbearance if the borrower makes this request and affirms the borrower is experiencing a financial hardship during the COVID-19 emergency. Servicers may not require any additional information from the borrower before granting a CARES Act forbearance.

A request for CARES Act forbearance qualifies as a short-term payment forbearance program under Regulation X, so it is excluded from some of the otherwise applicable loss mitigation requirements (note, small servicers are exempt from the loss mitigation requirements). When the borrower makes the forbearance request and affirms the hardship, it constitutes an “incomplete loss mitigation application” for purposes of Regulation X, and requires servicers to provide the required loss mitigation notices and comply with the other applicable regulatory requirements. The acknowledgment notice, 30-day evaluation and notice, the appeals notice, the early intervention notice and the live contact, all can now be sent within a reasonable time. The applicable timeframes are relaxed.

The agencies will not take supervisory or enforcement action against servicers for delays in sending the annual escrow statement, provided servicers are making good faith efforts to provide these statements within a reasonable time. This applies regardless of whether the borrower is experiencing a financial hardship, and it applies to small servicers.

Servicers can provide payoff notices in a reasonable time rather than within 7 business days if they cannot provide it within 7 business days due to the COVID-19 emergency. This provision also applies to small servicers.