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The American Bankers Association (ABA) values the chance to comment on the Consumer Financial Protection Bureau's (Bureau) interim last guideline (IFR) affecting the treatment of specific COVID-19 associated Loss Mitigation Options under RESPA and Reg. X. ABA values the Bureau's understanding of the complicated concerns dealing with mortgage customers and servicers throughout the COVID-19 pandemic and the Bureau's initiative to use short-term solutions that assist in servicer choices to help pandemic-affected borrowers. ABA thinks that the IFR offers an effective balance of debtor defenses and servicer flexibility, which will benefit both consumers and market significantly.
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Summary of the Comment:

ABA strongly supports the IFR's provisions that modify Regulation X to allow mortgage servicers to use momentarily specific loss mitigation options without acquiring a total loss mitigation application. These short-term accommodations will significantly assist servicers by dealing with regulative doubts concerning the application of Regulation X to post-forbearance processes, and they will substantially lower concerns associated with requirements to process complete loss mitigation applications for loan deferrals. Given the high of loans that are currently in COVID-related forbearances, we think the benefits of this rule are substantial.

In addition, the explanations in the IFR will eliminate a number of the remaining compliance uncertainties surrounding Government Sponsored Enterprise (GSE) programs that feature structured application procedures.2 Because other mortgage financiers and insurance companies have revealed similar loss mitigation options, and given that extra main and secondary market entities are most likely to utilize GSE models as templates for their own COVID forbearance programs, we think this IFR will have a robust favorable influence on markets and customers.

However, ABA advises extra modifications to the IFR that will further help debtors and servicers during this unmatched time and better achieve the Bureau's objectives. We talk about these suggestions listed below.

Additional Recommendations:

First, 12 CFR 1024.41(c)( 2 )(v)(B) supplies that a servicer does not have to send out a loss mitigation application recommendation letter or abide by the reasonable diligence responsibilities to assist a borrower finish an application" [o] nce the borrower accepts a deal made pursuant to" the IFR. While ABA completely supports the Bureau's objective of minimizing problems on servicers throughout these uncertain times and believes this is entirely proper under the circumstances, we do not think the guideline, as written, will have the intended result. Many, possibly most, of the discussions in which a servicer assesses and offers a deferral plan will be considered a loss mitigation application pursuant to Regulation X, which would ordinarily trigger the requirement to send a recommendation letter within five business days. Following these conversations, servicers can not wait to see if the debtor accepts the deferral deal before identifying whether it requires to satisfy the recommendation letter requirements. Practically speaking, it would appear that the only time in which the interim last rule would permit a servicer to pass up the acknowledgment letter requirements is if the debtor is permitted to, and in turn does, accept the deferral offer on the initial phone call with the servicer. To attain what we presume to be the Bureau's intent, ABA suggests that the Bureau move the acknowledgment letter timeline to 5 business days after a debtor rejects any deferment offer.

Second, in order to certify as a deferment under the IFR, a servicer must "waive [] all existing late charges, charges, stop payment charges, or similar charges quickly upon the borrower's approval of the loss mitigation alternative." As composed, it appears that servicers need to waive all of these quantities, even if the charges or charges were accrued or assessed long before the COVID-19 pandemic. For example, a borrower might have a late fee from 2018 that is impressive. However, in order to qualify for this option under the IFR, the servicer will have to concur to waive that charge.

ABA believes that needing the waiver of any quantities that were accumulated or evaluated pre-COVID is unreasonable, arbitrary, and will likely serve as a considerable deterrent to providing a deferral strategy. ABA urges the Bureau to clarify that the waiver applies only to quantities accrued or assessed as a result of a payment that was not paid because of a financial challenge due, directly or indirectly, to the COVID-19 emergency.

Additionally, the phrase "similar charges" in the IFR is ambiguous and is generating considerable confusion in the market. ABA asks the Bureau to consider removing this phrase or, in the option, clarify it. ABA presumes that the Bureau did not intend for this arrangement to require servicers to waive 3rd party expenses that are generally allowed to be passed onto borrowers-expenses such as residential or commercial property evaluation costs, residential or commercial property conservation fees, foreclosure lawyer costs, and so forth. At a minimum, ABA respectfully requests that the Bureau consider clarifying that the arrangement does not cover these kinds of expenses/charges.

ABA Responses to Specific Requests for Comment:

The Bureau is especially thinking about whether the modifications properly balance providing flexibility to servicers to use relief quickly throughout the COVID-19 emergency situation with supplying important securities for borrowers participated in the loss mitigation application process, such as defenses from foreclosure.

ABA believes that the Bureau has appropriately balanced customer defense and functional performance. ABA agrees with the Bureau's assessment that extra versatilities are suitable throughout the remarkable scenarios provided by the COVID-19 emergency. The structured application treatments stated in the IFR assistance guarantee that servicers have the resources to resolve the remarkably large number of customers that will exit forbearances in the coming months. The rule sufficiently stabilizes these structured procedures with consumer defenses. The special payment deferment programs advanced by the Federal Housing Finance Agency (FHFA) and other entities will allow qualified debtors to avoid the risk of losing their homes, and enable them to resume repaying their mortgage loans without incurring a delinquency or extra fees or interest, and the programs use alternatives on how to repay the forborne quantity that servicers have postponed. This interim guideline assures that the consumer advantages and defenses meant by these national programs are successfully guaranteed as a condition to any regulatory benefits offered.

The Bureau also looks for discuss whether to require written disclosures for this, or any comparable exceptions that the Bureau may license in the future.

Most lenders memorialize the transaction with a deal letter to the debtor. This letter is an easy and concise verification of the loss mitigation solution and testament that the payments deferred will result in the forborne amounts being due at re-finance, sale, or benefit of the loan. ABA would not suggest a short-term deal disclosure as an extra requirement during disasters or emergencies. This requirement would increase the concern and slow the relief the servicer is providing to their borrowers. In addition, it might puzzle the customer with unneeded kinds at a stressful point in the process.

The Bureau also seeks discuss whether the Bureau ought to extend the exception established in brand-new § 1024.41(c)( 3 )(v) to other post-forbearance loss mitigation choices provided to borrowers impacted by other kinds of disasters and emergencies.

ABA thinks the benefits afforded under this IFR must be expanded to other post-forbearance loss mitigation alternatives developed to ease COVID-affected debtors and likewise to customers impacted by other kinds of catastrophes and emergencies. The VA, USDA and FHA provide practical loan modification options, such as improve modifications, that are not covered under this exemption, too other Fannie Mae and Freddie Mac loss mitigation solutions, such as Flex Mods. Our company believe these options are all advantageous to the consumer and must be available in an effective and structured way throughout this emergency situation and other catastrophes and emergency situations.

These other modification choices would not certify under the interim guideline mainly due to the fact that of the restriction on interest accrual on postponed payments and the requirement that the covered quantities should be paid back at the end of the loan term. We see no legitimate reason to leave out these valuable COVID-19 programs from the menu of choices available to consumers based upon an incomplete loss mitigation application. Some customers will not get approved for the payment deferment options, and extra alternatives will be crucial to ensure relief for all customers.

ABA advises that the Bureau customize the requirements under 1024.41(c)( 2 )(v)(A)( 2) so that the relief provided by the rule can be utilized for other kinds of loss mitigation services. This little explanation would substantially expand borrower alternatives that are necessary during the COVID-19 pandemic as well as other catastrophes and emergencies.

The Bureau has no factor to think that the extra versatility offered to covered persons by this interim final rule would differentially impact consumers in rural areas. The Bureau demands comment relating to the effect of the amended provisions on consumers in rural areas and how those effects may differ from those experienced by consumers usually.

ABA does not see the requirement for additional flexibility in the IFR for servicers in rural areas.

Conclusion:

ABA values the opportunity to talk about this proposal. If you have any questions about the material of this letter, please contact Sharon Whitaker at 202-663-5321 or Rod Alba at 202-663-5592.