Attention Secondary Market Lenders!

If you sell loans on the secondary market, there was a development last week you will want to be aware of.  On April 8, 2021,  Fannie Mae and Freddie Mac announced that they will only purchase loans that comply with the New General QM requirements.  This applies to applications received on or after July 1, 2021.

You may recall that in December 2020, the CFPB finalized the New General QM and the Seasoned QM requirements.  Both were set to take effect on March 1st with a mandatory compliance date of July 1, 2021.  However, in February 2021, it announced plans to make changes to these QMs.  On March 3rd, they issued a proposal to delay the mandatory compliance date for the New General QM to October 1, 2022. 

So, while the CFPB planned to kick the can down the road regarding the New General QM, Fannie and Freddie have other plans.  You will need to get up to speed on the requirements for the New General QM before July 1st.

Do you need more on the Seasoned and General QM changes that were finalized in December 2020?  Be sure to check out our webinar, “The New QM Rules”, which is available now OnDemand.  The “Repayment Ability and Risk Requirements Matrix 5.0” in the Free Lending Tools of our website is a good outline of the requirements as well.


Flexibility Rescinded & Warning Shots Fired: Are You Prepared?

We recently alerted you to the fact that the CFPB rescinded several temporary policy statements issued in 2020 which provided flexibility to financial institutions in response to the COVID-19 pandemic.  That was a warning shot to the industry that the CFPB intends to exercise the full scope of the supervisory and enforcement authority provided...  The CFPB also replaced a 2018 bulletin on supervisory communications (CFPB Bulletin 2018-01) with CFPB Bulletin 2021-01 which indicates the use of matters requiring attention (MRAs) will be used to effectively convey supervisory expectations.  This change clearly indicates a shift in tone from the previous administration.

The CFPB didn’t stop there.  It also issued CFPB Bulletin 2021-02, which warns mortgage servicers to take necessary steps to prevent a wave of avoidable foreclosures as the pandemic-related protections and forbearances expire.  The CFPB directs servicers to make sure that sufficient resources and staff are in place.  It cautions that being “unprepared is unacceptable”.  The CFPB also went on to indicate it will closely monitor how consumers are responded to, and …consider a servicer’s overall effectiveness in helping consumers when using its discretion to address compliance issues....

The Bulletin clearly states that companies which are unable to manage loss mitigation can expect enforcement activity.  It also describes eight specific areas that the CFPB will be closely monitoring during future oversight:

  1. Has clear and readily understandable information been provided about borrowers’ options for payment assistance?
  2. Are the outreach requirements to inform borrowers about loss mitigation options being complied with? 
  3. Is there discrimination present in any aspect of the process, particularly in communicating with borrowers or evaluating income for loss mitigation eligibility?
  4. Are loss mitigation inquiries being handled promptly?  (They will be monitoring hold times on phone lines!)
  5. Are policies and procedures reasonably designed to ensure borrowers receive accurate information about their loss mitigation options?
  6. Do completed loss mitigation applications receive timely, consistent evaluation?
  7. Are foreclosure restrictions followed (Federal, State, etc.)?
  8. Is credit reporting accurate?

Acting Director of the CFPB, David Uejio, stated, There is no time to waste, and no excuse for inaction.  No one should be surprised by what is coming.  He went on to state that struggling families should be put first and the CFPB …will hold accountable those who cause harm to homeowners and families

The aggressive tone is not altogether unexpected.  Mortgage loan servicers should heed this warning shot and make sure steps are being taken to verify appropriate procedures are in place and resources available. 

If you need to brush up on the mortgage servicing requirements, we’ve got you covered!  You can purchase our Mortgage Servicing webinar, which is available now OnDemand.  You can also listen in live on August 12, 2021, (registration information will be posted on our website soon).


CFPB Proposes Mortgage Servicing Changes and FDCPA Delay

The CFPB is continuing their efforts to minimize the number of foreclosures resulting from the COVID-19 Pandemic.  As such, it recently proposed changes to the mortgage servicing rules which set out to give …both servicers and borrowers…tools and time…to prevent avoidable foreclosures….

The CFPB warns that nearly 1.7 million borrowers could leave forbearance programs later this year.  As a result, it wants additional guardrails and tools in place when it comes to borrowers’ principal residences.  The proposal seeks to:

Give Borrowers Time

Servicers would generally be prohibited from starting foreclosure until 2022.

Give Servicers Options

Keep Borrowers Informed

When making live contact, servicers would generally need to determine whether someone is experiencing a COVID-19 related hardship and either provide information on available options or information on the borrower’s current forbearance program and any future options.  This would be on a temporary basis.

The CFPB is looking to move quickly on this proposal.  Comments are due by May 10, 2021, with a proposed effective date of August 31, 2021.

On another note, the CFPB also proposed to delay the effective date for changes to the Fair Debt Collection Practices Act (FDCPA).  Those changes are scheduled to take effect November 30, 2021 and the proposal seeks to delay the effective dates until January 29, 2022.  Comments will be accepted for 30 days after the proposal is published in the Federal Register.


CFPB Rescinds Statements on COVID-Related Relief

Effective April 1st, the CFPB rescinded several policy statements previously issued in response to the COVID-19 pandemic.  It also rescinded a 2018 Bulletin on “Changes to Types of Supervisory Communications”.  This bulletin is replaced by Bulletin 2021-01, which indicates the CFPB will continue to use Matters Requiring Attention (MRAs) to communicate expectations and Compliance Management System deficiencies; and address violations.  MRAs may be issued with or without a violation of law.

The following statements have been rescinded:

Statement of Policy on Bureau Supervisory and Enforcement Response to COVID-19 Pandemic: This Statement indicated the CFPB would consider an institution’s staffing, resources and other pandemic-related challenges in its supervisory activities and enforcement actions.  It also stated the CFPB would be “sensitive” to good-faith efforts intended to help consumers.

Statement of Policy on Supervisory and Enforcement Practices Regarding Quarterly Reporting Under the Home Mortgage Disclosure ActThis Statement gave relief to institutions required to report HMDA data quarterly, indicating the failure to do so would not result in a citation or enforcement action.  In light of this, data for the first quarter of 2021 will be due by May 31, 2021 for quarterly filers.

Statement on Supervisory Enforcement Practices Regarding CFPB Information Collections for Credit Card and Prepaid Account Issuers: This Statement gave credit and prepaid card issuers some relief in submitting agreements; price and availability information.

Statement on Supervisory and Enforcement Practices Regarding the Fair Credit Reporting Act and Regulation V in Light of the CARES ActThis Statement communicated a “flexible supervisory and enforcement approach”, and consideration of an institution’s good faith efforts when evaluating furnishers’ responsibilities.  Note, institutions should continue to report consumer report information as required under the CARES Act.

Statement on Supervisory and Enforcement Practices Regarding Regulation Z Billing Error Resolution Timeframes in Light of the COVID-19 Pandemic:  This Statement indicated the CFPB would consider a creditor’s circumstances and good faith efforts when billing errors are not resolved within the required timeframes.

Statement on Supervisory and Enforcement Practices Regarding Electronic Credit Card Disclosures in Light of the COVID-19 PandemicThis Statement gave relief to institutions that did not obtain E-Sign consent during phone calls prior to giving disclosures electronically.

If you made any allowances or changes to your processes as a result of any of these statements, you will want to communicate that “relief” is no longer in effect. 


A Qualified Mortgage (QM) Curveball

On February 23rd, the CFPB issued a statement on the planned changes to the General Qualified Mortgage (QM) definition and the new Seasoned QM definition.  Both are set to go into effect on March 1st

According to the statement, both the revised General QM and Seasoned QM rules will still go into effect on March 1st.  However, it appears the CFPB plans to delay the July 1st mandatory compliance date for the General QM, as well as, the Temporary QM expiration date.

If this happens, there will be two versions of the General QM (current and revised), a Temporary QM and the new Seasoned QM.  The other QMs will remain unchanged (small creditor, FHA, VA, etc.).  The rules, as originally written, were going to have the biggest impact on secondary market lending.  With yesterday’s curveball; however, our best guess is that secondary market loan underwriting will remain unchanged until the CFPB decides what to do next.

The CFPB plans to revisit parts of the revised General QM definition and seemingly the Seasoned QM option as a whole.  If the CFPB does decide to change or revoke the Seasoned QM, it will also address what happens with applications received on or after March 1st, while the rule was in effect.

Join us on March 9th as we bring you the ins and outs and where we’re at with all these QM changes in plain English!