Protections for Borrowers Affected by the COVID-19 Emergency Under RESPA (Regulation X)

Protections for Borrowers Affected by the COVID-19 Emergency Under RESPA (Regulation X)

The Bureau has published a proposed rule that would make a few significant amendments to Regulation X in connection with the ongoing COVID-19 pandemic. First, the proposal would institute a foreclosure moratorium preventing any mortgage servicer from referring a delinquent mortgage on a borrower's primary residence for foreclosure until after December 31, 2021. The Bureau claims the goal is to prevent mortgage servicers from being inundated and loans falling through the cracks in October and November with borrowers rolling off of forbearance.  It also claims the period is intended to allow borrowers more time to review options because they are overwhelmed.

Second, the proposal would allow credit unions to offer certain modifications based on an incomplete loss mitigation application, such as the streamlined modifications currently permitted by the GSEs. To be eligible, the loan modification must be made available to a borrower experiencing a COVID-19-related hardship; cannot result in the increase of the borrower's monthly principal and interest payment; may not extend the term of the loan by more than 480 months; any amounts deferred to the end of the loan must not accrue interest; no fee can be charged for the modification; the servicer must waive all existing late charges, penalties, stop payment fees, or similar charges; and the borrower's acceptance of an offer of the loan modification must bring the borrower current. Finally, the proposal makes changes to the live contact and the due diligence provisions intended to help borrowers rolling off of forbearance get information about their options. The Bureau is hoping the rule would take effect on or before August 31, 2021. Questions for comment include:

  • What would this moratorium mean for your credit unions?
  • Are there more workable alternatives the Bureau could use to accomplish these goals beyond a broad moratorium? The Bureau is also considering these alternatives:
    o A final rule extending a special review period for a number of days past the expiration of any FHFA/FHA moratorium.
    o A final rule creating a “grace period” of 60 to 120 days after a borrower exits forbearance for the borrower to make contact and attempt to resolve the delinquency.
    o Extending the length of delinquency before foreclosure referral can be made from 120 days. 
    o Creating an exemption for loans where the borrower has applied for and cannot qualify for any loss mitigation option. 
  • Would your credit union anticipate any issues related to the conditions the Bureau describes for streamlined modifications that can be offered based on an incomplete application? Are these conditions in line with GSE expectations?

 

CUNA submitted comments on May 10th - Read the letter