CFPB is issuing an interim final rule to amend the Real Estate Settlement Procedures Act (Regulation X) to temporarily permit mortgage servicers to offer certain loss-mitigation options based on the evaluation of an incomplete loss-mitigation application. Servicers may offer eligible loss-mitigation options to a borrower that has received a payment forbearance under the program that was made available to borrowers experiencing financial hardship due, directly or indirectly, to the COVID-19 emergency, including one offered pursuant to section 4022 of the Coronavirus Aid, Relief, and Economic Security (CARES) Act. Servicers may also offer eligible loss-mitigation options to a borrower that has had other principal and interest payments that are due and unpaid as a result of a financial hardship due, directly or indirectly, to the COVID-19 emergency. This interim final rule becomes effective on July 01, 2020. Comments must be received on or before August 14, 2020.
Regulation X generally requires servicers to obtain a complete loss-mitigation application before evaluating a mortgage borrower for a loss-mitigation option, such as a loan modification or short sale. Regulation X provides an exception from this requirement for certain short-term loss mitigation options. Due to the particular needs of mortgage servicers and borrowers during the COVID-19 emergency, CFPB is amending Regulation X. The amendment conditions eligibility for the new exception on the loss-mitigation option satisfying three criteria:
- The loss-mitigation option must permit the borrower to delay paying certain amounts until the mortgage loan is refinanced, the mortgaged property is sold, the term of the mortgage loan ends, or, for a mortgage insured by Federal Housing Administration, the mortgage insurance terminates. These amounts include, without limitation, all payments forborne under a payment forbearance program made available to borrowers experiencing financial hardship due to the COVID-19 emergency, including one made pursuant to CARES Act. These amounts also include, without limitation all other principal and interest payments that are due and unpaid by a borrower experiencing financial hardship due to the COVID-19 emergency.
- Any amounts that the borrower may delay paying through the loss- mitigation option do not accrue interest; the servicer does not charge any fee in connection with the loss mitigation option; and the servicer waives all existing late charges, penalties, stop payment fees, or similar charges promptly upon the borrower's acceptance of the loss mitigation option.
- The borrower's acceptance of the loss-mitigation offer must resolve any prior delinquency. These criteria maintain important protections for borrowers and are intended to align with the COVID-19 payment deferral option announced by the Federal Housing Finance Agency (FHFA) and other similar programs.
The interim final rule also excludes servicers from certain regulatory requirements if a borrower accepts an option offered pursuant to the new exception. Specifically, the interim final rule provides that the servicer is not required to continue the reasonable diligence efforts Section 1024.41(b)(1) otherwise requires or send the acknowledgement notice Section 1024.41(b)(2) otherwise requires.
Comment Due Date: August 14, 2020
Effective Date: July 01, 2020
Keywords: Americas, US, Banking, Securities, COVID-19, Real Estate, Regulation X, Credit Risk, CARES Act, Mortgage, CFPB
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