Flexibility Rescinded & Warning Shots Fired: Are You Prepared?

We recently alerted you to the fact that the CFPB rescinded several temporary policy statements issued in 2020 which provided flexibility to financial institutions in response to the COVID-19 pandemic.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).


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