The American Bankers Association (ABA) values the chance to talk about the Consumer Financial Protection Bureau's (Bureau) interim final guideline (IFR) impacting the treatment of specific COVID-19 related Loss Mitigation Options under RESPA and Reg. X. ABA appreciates the Bureau's understanding of the intricate concerns dealing with mortgage borrowers and servicers throughout the COVID-19 pandemic and the Bureau's initiative to provide short-lived services that facilitate servicer alternatives to help pandemic-affected debtors. ABA believes that the IFR offers an effective balance of customer defenses and servicer flexibility, which will benefit both consumers and market substantially.

Summary of the Comment:

ABA highly supports the IFR's provisions that change Regulation X to permit mortgage servicers to provide briefly specific loss mitigation choices without acquiring a total loss mitigation application. These short-term lodgings will considerably help servicers by dealing with regulatory doubts worrying the application of Regulation X to post-forbearance procedures, and they will substantially lower burdens related to requirements to process total loss mitigation applications for loan deferments. Given the high volumes of loans that are currently in COVID-related forbearances, we believe the benefits of this guideline are significant.

In addition, the information in the IFR will remove many of the sticking around compliance uncertainties surrounding Government Sponsored Enterprise (GSE) programs that feature structured application procedures.2 Because other mortgage financiers and insurers have actually announced similar loss mitigation alternatives, and since additional primary and secondary market entities are most likely to utilize GSE designs as design templates for their own COVID forbearance programs, we believe this IFR will have a robust favorable effect on markets and consumers.

However, ABA advises extra changes to the IFR that will further assist debtors and servicers throughout this unprecedented time and better accomplish the Bureau's objectives. We talk about these recommendations below.

Additional Recommendations:

First, 12 CFR 1024.41(c)( 2 )(v)(B) supplies that a servicer does not need to send out a loss mitigation application acknowledgment letter or comply with the reasonable diligence commitments to help a borrower finish an application" [o] nce the customer accepts a deal made pursuant to" the IFR. While ABA completely supports the Bureau's objective of minimizing problems on servicers during these unsure times and thinks this is completely proper under the scenarios, we do not think the rule, as composed, will have the designated impact. Many, perhaps most, of the discussions in which a servicer examines and offers a deferral strategy will be considered a loss mitigation application pursuant to Regulation X, which would generally trigger the requirement to send a recommendation letter within 5 organization days. Following these discussions, servicers can not wait to see if the debtor accepts the deferral offer before figuring out whether it needs to satisfy the acknowledgment letter requirements. Practically speaking, it would appear that the only time in which the interim last guideline would allow a servicer to give up the acknowledgment letter requirements is if the borrower is permitted to, and in turn does, accept the deferment deal on the preliminary phone call with the servicer. To achieve what we presume to be the Bureau's intent, ABA recommends that the Bureau shift the acknowledgment letter timeline to five organization days after a customer rejects any deferral offer.

Second, in order to certify as a deferment under the IFR, a servicer must "waive [] all existing late charges, charges, stop payment fees, or similar charges quickly upon the borrower's approval of the loss mitigation option." As written, it appears that servicers should waive all of these quantities, even if the charges or costs were accrued or evaluated long before the COVID-19 pandemic. For example, a debtor could have a late cost from 2018 that is outstanding. However, in order to certify for this option under the IFR, the servicer will need to consent to waive that fee.

ABA thinks that needing the waiver of any amounts that were accumulated or assessed pre-COVID is unreasonable, arbitrary, and will likely serve as a significant deterrent to offering a deferral plan. ABA prompts the Bureau to clarify that the waiver applies only to amounts accrued or examined as a result of a payment that was not paid due to the fact that of a financial challenge due, straight or indirectly, to the COVID-19 emergency situation.

Additionally, the expression "comparable charges" in the IFR is unclear and is generating substantial confusion in the industry. ABA asks the Bureau to consider eliminating this phrase or, in the option, clarify it. ABA presumes that the Bureau did not plan for this provision to need servicers to waive 3rd party costs that are normally enabled to be passed onto borrowers-expenses such as residential or commercial property inspection fees, residential or commercial property preservation charges, foreclosure lawyer costs, and so forth. At a minimum, ABA respectfully demands that the Bureau think about clarifying that the arrangement does not cover these kinds of expenses/charges.

ABA Responses to Specific Requests for Comment:

The Bureau is particularly thinking about whether the changes properly stabilize supplying flexibility to servicers to provide relief quickly during the COVID-19 emergency situation with providing essential defenses for customers taken part in the loss mitigation application process, such as defenses from foreclosure.

ABA thinks that the Bureau has appropriately well balanced consumer defense and operational effectiveness. ABA agrees with the Bureau's evaluation that extra versatilities are proper during the extraordinary situations provided by the COVID-19 emergency. The structured application procedures set forth in the IFR help make sure that servicers have the resources to resolve the remarkably a great deal of borrowers that will exit forbearances in the coming months. The guideline effectively balances these structured procedures with consumer securities. The special payment deferment programs advanced by the Federal Housing Finance Agency (FHFA) and other entities will enable qualified borrowers to avoid the danger of losing their homes, and allow them to resume repaying their mortgage loans without sustaining a delinquency or extra fees or interest, and the programs use alternatives on how to repay the forborne quantity that servicers have actually delayed. This interim guideline assures that the customer advantages and securities meant by these nationwide programs are effectively ensured as a condition to any regulative advantages provided.

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

Most lenders memorialize the transaction with a deal letter to the debtor. This letter is an easy and succinct confirmation of the loss mitigation option and statement that the payments deferred will result in the forborne amounts being due at re-finance, sale, or reward of the loan. ABA would not suggest a short-term offer disclosure as an additional requirement throughout disasters or emergencies. This requirement would increase the burden and slow the relief the servicer is offering to their debtors. In addition, it might puzzle the consumer with unneeded forms at a demanding point while doing so.

The Bureau likewise looks for comment on whether the Bureau must extend the exception developed in new § 1024.41(c)( 3 )(v) to other post-forbearance loss mitigation alternatives offered to customers affected by other types of disasters and emergency situations.

ABA believes the benefits managed under this IFR ought to be expanded to other post-forbearance loss mitigation alternatives developed to relieve COVID-affected customers and also to customers impacted by other kinds of disasters and emergencies. The VA, USDA and FHA offer viable loan modification options, such as streamline modifications, that are not covered under this exemption, as well other Fannie Mae and Freddie Mac loss mitigation options, such as Flex Mods. Our company believe these alternatives are all beneficial to the customer and should be available in an efficient and streamlined manner throughout this emergency and other catastrophes and emergencies.

These other adjustment alternatives would not qualify under the interim guideline primarily due to the fact that of the prohibition on interest accrual on delayed payments and the requirement that the covered amounts need to be paid back at the end of the loan term. We see no legitimate factor to exclude these important COVID-19 programs from the menu of choices available to consumers based upon an insufficient loss mitigation application. Some borrowers will not certify for the payment deferment alternatives, and additional choices will be important to guarantee relief for all consumers.

ABA suggests that the Bureau modify the criteria under 1024.41(c)( 2 )(v)(A)( 2) so that the relief provided by the rule can be used for other types of loss mitigation options. This little clarification would considerably expand customer choices that are required during the COVID-19 pandemic along with other disasters and emergencies.

The Bureau has no reason to believe that the additional flexibility used to covered persons by this interim final rule would differentially affect customers in rural areas. The Bureau demands comment concerning the impact of the amended arrangements on consumers in backwoods and how those impacts might differ from those experienced by customers usually.

ABA does not see the need for extra versatility in the IFR for servicers in rural locations.

Conclusion:

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