Removing Barriers Blog

CFPB Releases Rules on Loss Mitigation and Determining Underserved Areas
Posted June 24, 2020 by Chandler Schuette

The CFPB issued two separate rules on loss mitigation under the CARES Act and determining underserved areas under Regulation Z, respectively.

The Interim Final Rule (IFR) on loss mitigation makes it clear that servicers do not violate Regulation X by offering certain COVID-19-related loss mitigation options based on an evaluation of limited application information collected from the borrower.  Normally, with certain exceptions, Regulation X would require servicers to collect a complete loss mitigation application before making an offer. 

The IFR specifies that the loss mitigation option must meet certain criteria to qualify for an exception from the typical requirement to collect a complete application. The IFR also provides servicers relief from certain requirements under Regulation X that normally would apply after a borrower submits an incomplete loss mitigation application.  Once the borrower accepts an offer for an eligible program under the IFR, the servicer need not exercise reasonable diligence to obtain a complete application and need not provide the acknowledgment notice that is generally required under Regulation X when a borrower submits a loss mitigation application.

In a separate action, the Bureau’s Interpretive Rule on Determining Underserved Areas provides guidance to creditors about the way in which the Bureau determines which counties qualify as “underserved” for a given calendar year. 

The Bureau’s annual list of rural and underserved counties and areas is used in applying various provisions under Regulation Z, which implements the Truth in Lending Act.  These provisions include the exemption from the requirement to establish an escrow account for a higher-priced mortgage loan and the ability to originate balloon-payment qualified mortgages and balloon-payment high cost mortgages.