(April 9, 2021) Widely depicted as a freeze on foreclosures until after Dec. 31, the CFPB this week unveiled a set of new rules it said were aimed at preventing “avoidable foreclosures” as the emergency federal foreclosure protections expire.
In a release, the bureau asserted that 3 million homeowners are behind on their mortgages due to the financial impact of the coronavirus crisis (with an estimated 2.1 million mortgages in forbearance and at least 90 days delinquent). The agency said the delinquent mortgage total has doubled since the beginning of the pandemic and that, as of December 2020, 6% of mortgages nationwide were delinquent.
Further, the bureau stated, industry data suggest that nearly 1.7 million borrowers will exit forbearance programs in September and the following months, “with many of them a year or more behind on their mortgage payments.”
CFPB said its proposal “seeks to ensure that both servicers and borrowers have the tools and time they need to work together to prevent avoidable foreclosures, recognizing that the expected surge of borrowers exiting forbearance in the fall will put mortgage servicers under strain.”
Specifics of the proposal include:
- A special pre-foreclosure review period that would generally prohibit servicers from starting foreclosure until after Dec. 31, 2021. The bureau said it is seeking comment on that date, as well as whether there are more limited ways to achieve the same purpose. “For example, the CFPB is considering whether to permit earlier foreclosures if the servicer has taken certain steps to evaluate the borrower for loss mitigation or made efforts to contact an unresponsive borrower.” The provision would only apply to loans secured by a borrower’s principal residence.
- A provision permitting servicers to offer certain streamlined loan modification options to borrowers with COVID-19-related hardships based on the evaluation of an incomplete application. “Normally, with certain exceptions, Regulation X requires servicers to review a borrower for all available options at once, which can mean borrowers have to submit more documents before a servicer can make a decision,” CFPB said. The agency said the provision would allow servicers to get borrowers into an affordable mortgage payment faster, with less paperwork for both the servicer and the borrower. It would only be available for modifications that do not increase a borrower’s monthly payment and that extend the loan’s term by no more than 40 years from the modification’s effective date.
- Temporary changes to certain required servicer communications to ensure that borrowers receive key information about their options at the appropriate time during the pandemic.
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(April 9, 2021) Two debt collection rules – which had been slated to take effect Nov. 30 – will now have a delayed compliance deadline of Jan. 29, 2022, under yet another proposal issued this week by the bureau, with the intent of giving those affected more implementation time amid the ongoing challenges of the COVID-19 pandemic.
CFPB issued the final rules late last year (in October and December) under the Fair Debt Collection Practices Act (FDCPA). The October final rule focuses on the use of communications related to debt collection and clarifies prohibitions on harassment and abuse, false or misleading representations, and unfair practices by debt collectors when collecting consumer debt.
The December rule clarifies disclosures debt collectors must provide to consumers at the beginning of collection communications. It also prohibits debt collectors from making threats to sue, or from suing, consumers on time-barred debt; and requires debt collectors to take specific steps to disclose the existence of a debt to consumers before reporting information about the debt to a consumer reporting agency.
“Since the Debt Collection Final Rules were published, the global COVID-19 pandemic has continued to cause widespread societal disruption, with effects extending into 2021,” the bureau said in a notice scheduled for publication in the Federal Register. “In light of that disruption, the Bureau believes that providing additional time for stakeholders to review and, if applicable, to implement the final rules may be warranted.”
The rules adopted last year permit debt collectors to choose to comply with the rules’ requirements and prohibitions ahead of their effective date. However, the CFPB notes that the FDCPA and other applicable law would continue to govern debt collectors’ conduct, with safe harbors and presumptions implemented only as of the rules’ effective date. Comments are sought on this aspect of Wednesday’s proposed delay.
“The Bureau requests comment on, for example, the costs and benefits of permitting debt collectors to obtain a safe harbor for using the Bureau’s model validation notice as of November 30, 2021, even if the Debt Collection Final Rules do not otherwise take effect until January 29, 2022,” it said.
Comments on the proposed delay will be due 30 days after their publication in the Register.
LINK:
CFPB Proposes Delay of Effective Date for Recent Debt Collection Rules
(April 9, 2021) Following its proposed rules to prevent “avoidable foreclosures,” the bureau later in the week released a new bulletin detailing its expectations for mortgage servicers’ engagement with borrowers in the closing months of forbearance programs created in the wake of the financial impact of the coronavirus crisis.
Bulletin 2021-02, “Supervision and Enforcement Priorities Regarding Housing Insecurity,” explains the CFPB’s intention to monitor servicers’ engagement with borrowers “at all stages in the process” in coming months and to prioritize mortgage servicing oversight work in carrying out its enforcement and supervision in the coming year.
The bulletin states that, in its oversight work, the CFPB plans to pay particular attention as to whether servicers are:
- Providing clear and readily understandable information to borrowers about their options for payment assistance;
- Complying with the outreach requirements in Regulation X (Real Estate Settlement Procedures Act, or RESPA) to ensure that borrowers are getting needed information about loss mitigation options;
- Complying with the Equal Credit Opportunity Act’s (ECOA’s) prohibition against discriminating against any applicant, with respect to any aspect of a credit transaction, including in their work with limited English proficiency borrowers and those having a range of income types;
- Promptly handle loss mitigation inquiries and avoid unreasonably long hold times on phone lines (for example, the CFPB plans to scrutinize servicer conduct where hold times are significantly longer than industry averages);
- Maintaining policies and procedures that are reasonably designed to achieve the continuity of contact objectives to ensure that delinquent borrowers receive accurate information about their loss mitigation options;
- Evaluating the applications consistent with the Regulation X requirements to promote timely and consistent evaluations (for borrowers who submit complete loss mitigation applications);
- Complying with foreclosure restrictions in Regulation X and other federal or state foreclosure restrictions; and
- Whether servicers are complying with the Fair Credit Reporting Act’s (FCRA) requirements to report the credit obligation or account appropriately.
LINK:
Bulletin 2021-02: Supervision and Enforcement Priorities Regarding Housing Insecurity
(April 2, 2021) Two new summaries – of a interim final rule concerning enhancements to NCUA’s Central Liquidity Facility (CLF) and of an NCUA “regulatory alert” on CFPB’s expanded exemptions concerning higher-priced mortgage loans (HMPLs) – were published by NASCUS this week.
As a benefit of membership, only members have access to the summaries.
Regarding the CLF enhancements, the NCUA Board approved the interim final rule (IFR) at its meeting March 18. Generally, it extends provisions enacted under the 2020 Coronavirus Aid, Relief, and Economic Security Act (CARES Act) that expanded CLF access beyond natural person credit unions to include access for corporate credit unions or a group of corporates. That expansion, implemented under an interim rule a year ago, was due to expire Dec. 31, 2020, but was extended through Dec. 31, 2021, under the Consolidated Appropriations Act, 2021, enacted into law late last year. Also extended are provisions approved in April governing CLF capital stock subscriptions by agent members.
The IFR also extends and clarifies the regulatory provisions related to a member withdrawing from CLF membership: The immediate withdrawal period for credit unions that joined the CLF between April 29, 2020, and Dec. 31, 2020, now continues through Dec. 31, 2021; for those joining between Jan. 1 and Dec. 31, 2021, the immediate withdrawal period continues through Dec. 31, 2022.
The rule took effect March 24; comments are due by May 24.
Regarding the regulatory alert on HPMLs issued in mid-March, the summary addresses the CFPB’s rule issued in February. The rule exempts from the HPML escrow requirement any loan made by a bank or credit union and secured by a first lien on the principal dwelling of a consumer if:
- the institution has assets of $10 billion or less (as of Dec. 31 in the preceding year);
- the institution and its affiliates originated 1,000 or fewer loans secured by a first lien on a principal dwelling during the preceding calendar year; and
- certain of the existing HPML escrow exemption criteria are met.
Proposed in July, CFPB said the rule represents the last mandatory rulemaking to implement the 2018 Economic Growth, Regulatory Relief, and Consumer Protection Act (EGRRCPA, S.2155).
LINKS:
NASCUS Summary: Interim Final Rule, Central Liquidity Facility (CLF) (members only)
(April 2, 2021) Seven policy statements issued in 2020 from late March to early June that provided temporary flexibilities to financial institutions in the areas of consumer mortgages, credit reporting, credit cards, and prepaid cards are rescinded as of April 1 (Thursday), the Consumer Financial Protection Bureau (CFPB) announced this week.
The bureau also said it was rescinding its 2018 bulletin on supervisory communications and replacing it with a revised one describing its use of matters requiring attention (MRAs) “to effectively convey supervisory expectations.” That new bulletin, 2021-01, states that “effective immediately,” the bureau will no longer use “supervisory recommendations” in these communications.
“We are now over a year into the disruptive and deadly COVID-19 crisis. The virus has affected industry as well as consumers, but individuals and families have been hardest-hit by the pandemic’s health and economic impacts,” said CFPB Acting Director Dave Uejio. “Providing regulatory flexibility to companies should not come at the expense of consumers. Because many financial institutions have developed more robust remote capabilities and demonstrated improved operations, it is no longer prudent to maintain these flexibilities. The CFPB’s first priority, today and always, is protecting consumers from harm.”
The rescinded policy statements were issued between March 26 through June 3, 2020, and temporarily provided financial institutions with flexibilities regarding certain regulatory filings or compliance with consumer financial laws and regulations. The bureau said the rescissions “reflect the Bureau’s commitment to consumer protection, and the fact that financial institutions have had a year to adapt their operations to the difficulties posed by the pandemic.”
The bureau, in its release, included links to each policy statement rescission notice and the new MRA bulletin.
Rescission of Statement on Bureau Supervisory and Enforcement Response to COVID-19 Pandemic (March 26, 2020)
Rescission of Statement on Supervisory and Enforcement Practices Regarding Quarterly Reporting Under the Home Mortgage Disclosure Act (March 26, 2020
(April 2, 2021) Seemingly pulling no punches, the CFPB late this week sent a warning to mortgage servicers: unprepared for an expected surge in homeowners needing assistance is unacceptable – and the companies should “gear up.”
In a compliance bulletin, the bureau said mortgage servicers should take “all necessary steps” to prevent a wave of what it called “avoidable foreclosures” coming this fall. “Millions of homeowners currently in forbearance will need help from their servicers when the pandemic-related federal emergency mortgage protections expire this summer and fall,” the bureau stated in the bulletin. “Servicers should dedicate sufficient resources and staff now to ensure they are prepared for a surge in borrowers needing help.”
The bureau said it will closely monitor how servicers engage with borrowers, respond to borrower requests, and process applications for loss mitigation. CFPB added that it will consider a servicer’s overall effectiveness in helping consumers when using its discretion to address compliance issues that arise.
“Our first priority is ensuring struggling families get the assistance they need,” bureau Acting Director Dave Uejio said in a statement. “Servicers who put struggling families first have nothing to fear from our oversight, but we will hold accountable those who cause harm to homeowners and families.”
In its release, the agency stated that as of January approximately 2.7 million borrowers remained in federally- backed mortgages with access to forbearance; 2.1 million borrowers, the bureau said, were in forbearance and at least 90 days delinquent on their mortgage payments. Another 242,000 mortgages not in forbearance programs were at least 90 days delinquent, the agency said.
CFPB added that industry data suggest that nearly 1.7 million borrowers will exit forbearance programs in September and the following months, with many of them a year or more behind on their mortgage payments. Beginning with the expiration of the federal foreclosure moratoriums put in place by last year’s Coronavirus Aid, Relief, and Economic Security (CARES) Act at the end of June, CFPB said, “mortgage servicers will need ramped-up capacity to reach out and respond to the large number of homeowners likely to need loss mitigation assistance.”
To meet this surge, servicers will need to plan now, the bureau said. “In its oversight of mortgage servicers, the CFPB is focused on preventing avoidable foreclosures,” the agency added.
Particular attention will be paid, the bureau said, to how well servicers are being proactive, working with borrowers, addressing language access, evaluating income fairly, handling inquiries promptly, and preventing avoidable foreclosures
LINK:
CFPB April 1, 2021 compliance bulletin.
(April 2, 2021) Evictions by major multistate landlords, eviction management services and private equity firms, among others, will be targeted for investigation by the CFPB and the Federal Trade Commission (FTC) the agencies said in a joint release this week.
Acting Director Dave Uejio and Federal Trade Commission (FTC) Acting Chairwoman Rebecca Slaughter in the release said the action was aimed at helping stop illegal evictions and protecting consumers facing economic hardship resulting from the coronavirus crisis.
“We will not tolerate illegal practices that displace families and expose them – and by extension all of us – to grave health risks,” the pair said. “Evicting tenants in violation of the CDC (Centers for Disease Control and Prevention), state, or local moratoria, or evicting or threatening to evict them without apprising them of their legal rights under such moratoria, may violate prohibitions against deceptive and unfair practices, including under the Fair Debt Collection Practices Act (FDCPA) and the Federal Trade Commission Act.”
The two agency leaders cited a CFPB report released at the beginning of March which, they asserted, found that renters are particularly endangered, with more than 8.8 million tenants behind on rent. They said those tenants at risk of homelessness are disproportionately people of color, primarily Black and Hispanic families.
Federal, state, and local governments, they noted, have put in place protections against evictions to keep people in their homes and to stop the spread of COVID-19. “Research has shown that eviction moratoriums save lives,” they said. They added that the CDC extended the federal moratorium on evictions by three months.
“Unfortunately, there are reports that major multistate landlords are forcing people out of their homes despite the government prohibitions or before tenants are aware of their rights,” the agency leaders stated. “Depriving tenants of their rights is unacceptable. Many of the tenants at risk of eviction are older Americans and people of color, who already experience heightened risks from COVID-19.”
(March 26, 2021) More than a half million complaints – up 54% from the previous year – were fielded in 2020 by the CFPB, reflecting the financial impact of the coronavirus crisis, the agency said this week. In a release, the bureau said it handled 542,300 complaints last year, with well more than half of those (58%) emanating from credit and consumer reporting objections. Debt collection (15%), credit card (7%), checking or savings (6%), and mortgage complaints (5%) were other major areas of complaints, the agency said.
Starting in April 2020, the bureau said, the month after the financial impact of the coronavirus crisis became apparent, consumers began to submit more than 3,000 complaints each month mentioning “coronavirus” keywords. Ultimately, by year’s end, more than 32,000 complaints mentioning the effects of the COVID-19 disease (or related keywords) were submitted last year, the CFPB said.
Complaints received about consumer and credit reporting claiming inaccurate information on their reports, the bureau said, outdistanced the total from the year before. The CFPB said consumers mostly submitted the complaints about Equifax, Experian, and TransUnion, the three largest Nationwide Credit Reporting Agencies (NCRAs).
The reporting companies, according to CFPB, provided closure responses noting that a dispute would be filed on the consumer’s behalf, but otherwise failed to address the issues consumers raise in their complaints. The bureau also said the NCRAs mentioned suspected third-party activity in their responses to consumers, but did not detail steps taken to authenticate consumers or to address the issues raised in their complaints.
“While the NCRAs typically provided substantive and comparatively detailed responses to the majority of complaints in prior years—including providing details of dispute investigations and outlining steps taken for consumers that are attempting to address identity theft—this year, the CFPB observed that the NCRAs stopped providing complete and accurate responses in many of these complaints,” the agency said.
Later this year, the agency said, it will release a separate report on complaints submitted about the NCRAs that are related to incomplete or inaccurate information on the consumers’ credit reports. The report, CFPB said, will be in keeping with reporting requirements under the Fair Credit Reporting Act (FCRA).
LINK:
CFPB 2020 Consumer Response annual report
(March 19, 2021) Saying it is concerned that some payments will be intercepted to cover such things as unpaid overdraft fees, the CFPB this week encouraged financial institutions (including credit unions) and debt collectors to allow the payments to reach consumers.
In a statement, CFPB Acting Director Dave Uejio said the bureau is “squarely focused” on addressing the impact of the coronavirus crisis on economically vulnerable consumers and is watching carefully the economic income payments (EIPs) to consumers authorized under the American Rescue Plan, adopted by Congress just last week. The EIPs were part of President Joe Biden’s plan to provide an economic stimulus to the country in the wake of the financial impact of the pandemic.
Uejio also noted he is staying in touch with state regulators and their efforts to protect consumer payments. He said he wants to better understand the effectiveness of those states’ efforts.
As for the payments themselves, Uejio said his agency is concerned that the funds will not reach consumers, and will instead be intercepted by financial institutions or debt collectors to cover overdraft fees, past-due debts, or other liabilities. “The Bureau will stay closely engaged on this issue as the COVID relief payment rollout continues.”
The CFPB acting director stated in the release that financial industry trade associations have told the bureau that their member institutions want to work with consumers struggling in the pandemic. “Many of these organizations have told us they have begun or soon will take proactive measures to help ensure that consumers can access the full value of their stimulus payments,” Uejio said. “If payments are seized, many financial institutions have pledged to promptly restore the funds to the people who should receive them.”
NASCUS maintains a website page outlining state wage garnishment guidance, established about a year ago with the first wave of stimulus payments under the CARES Act. The page lists the actions taken by states to shield payments from debt collectors and creditors.
NASCUS state wage garnishment guidance
(March 12, 2021) Sexual orientation discrimination and gender identity discrimination is prohibited under equal credit opportunity regulations, CFPB said this week in an interpretive rule. Further, the subhead for the press release issued by the agency announcing the rule read that the financial industry “is on notice that Bureau will not tolerate illegal discrimination against the LGBTQ+ community.”
CFPB Acting Director Dave Uejio said the interpretive rule is intended to clarify prohibitions under regulations implementing the Equal Credit Opportunity Act (ECOA). Uejio asserted that the action is to make clear that lenders cannot discriminate based on sexual orientation or gender identity. The bureau said discrimination includes that based on actual or perceived nonconformity with traditional sex- or gender-based stereotypes, and discrimination based on an applicant’s social or other associations.
“The CFPB will ensure that consumers are protected against such discrimination and provided equal opportunities in credit,” Uejio said in the release. The agency also indicated that it would take enforcement actions under the ECOA “to hold financial institutions accountable for their actions that violate ECOA.”
The bureau stated that in 2016 it held that the law supports arguments that the prohibition against sex discrimination also affords broad protection from discrimination based on an applicant’s sexual orientation and gender identity under ECOA (which implements the bureau’s Regulation B).
It also asserted that a Supreme Court decision last year (Bostock v. Clayton County, Georgia) held that the prohibition against sex discrimination in Title VII of the Civil Rights Act of 1964 encompasses sexual orientation discrimination and gender identity discrimination. On top of that, the agency said, a request for information (RFI) it issued last summer to solicit public comments and information to identify opportunities to prevent credit discrimination and encourage responsible innovation under ECOA and Regulation B (including how Bostock should be interpreted) supports the agency’s action this week.
(March 12, 2021) NASCUS also this week published a summary of CFPB’s proposal to delay the general “qualified mortgage” loan proposal, which would push the mandatory compliance date back by 15 months to Oct. 1, 2022.
The summary is available to members only.
Last week, the bureau issued the notice of proposed rulemaking (NPRM) to delay the rule, which was only finalized in December. Under the previous rule (the one on the books before the December rule was finalized), the requirement for general QM loans was that the borrower’s debt-to-income ratio (DTI) not exceed 43%.
Under the new rule adopted in December, which was slated to take effect July 1 but is proposed to be delayed to next year, a price-based approach was installed for limiting lending in replacement of the specific 43% DTI limit after determining that a loan’s price is a strong indicator of a consumer’s ability to repay.
Acting Director Uejio said last week that extending the compliance date would ensure that homeowners struggling with the financial impacts of the COVID-19 pandemic have the options they need.
The agency noted that if the proposal is finalized, a number of things would remain in place. That is: the old, DTI-based general QM definition; the new, price-based General QM definition; and the GSE Patch (unless the GSEs exit conservatorship prior to Oct. 1, 2022) would all remain available as long as the lender received the consumer’s application prior to Oct. 1, 2022.
Comments on the proposal are due April 5.
(March 12, 2021) A policy unveiled early last year by CFPB that limited the extent of the agency’s response to certain abusive acts or practices affecting consumers was rescinded Thursday, the bureau announced. CFPB said it intends now to “exercise its supervisory and enforcement authority consistent with the full scope of its statutory authority under the Dodd-Frank Act as established by Congress.” The release said the bureau intends these changes “to better protect consumers and the marketplace from abusive acts or practices, and to enforce the law as Congress wrote it.” Then-Director Kathleen Kraninger originally set the policy in place last year … Nellie Liang – a nominee for the Federal Reserve Board in 2018 (but whose nomination was never considered by the Senate Banking Committee, let alone the full Senate) – will be nominated as Treasury undersecretary for domestic finance, the White House said Thursday. The position is responsible for a wide variety of policy, including that for credit unions, banks and other financial institutions. Liang, an economist, is a former top Fed staff member … Meanwhile, the nomination of Rohit Chopra to be the next director of the CFPB received a tie vote this week in the Senate Banking Committee on a recommendation by the committee for confirmation. The tied recommendation will proceed, however, to consideration by the full Senate under rules adopted by the Senate early this year … NCUA and the federal banking agencies Thursday released a proposed list of 24 questions and answers addressing the private flood insurance provisions of the 2012 Biggert-Watters Flood Insurance Reform Act. Comments are due in 60 days. The proposal includes some references to a set of Q&As proposed last year and published July 6 in the Federal Register. Those Q&As only included two on private flood insurance, the agencies noted, adding that the rules for private insurance had just been finalized in 2019. The regulators said they plan to publish a final document in the Federal Register that will consolidate Thursday’s proposed private insurance Q&As with the 2020 proposed Q&As.
Agencies Release Proposed New Interagency Questions and Answers Regarding Private Flood Insurance