The American Bankers Association (ABA) values the chance to discuss the Consumer Financial Protection Bureau's (Bureau) interim last guideline (IFR) affecting the treatment of particular COVID-19 associated Loss Mitigation Options under RESPA and Reg. X. ABA values the Bureau's understanding of the intricate issues facing mortgage customers and servicers during the COVID-19 pandemic and the Bureau's effort to provide short-term options that help with servicer options to assist pandemic-affected customers. ABA thinks that the IFR supplies a reliable balance of borrower defenses and servicer versatility, which will benefit both customers and market significantly.

Summary of the Comment:

ABA strongly supports the IFR's provisions that amend Regulation X to allow mortgage servicers to offer briefly certain loss mitigation choices without acquiring a complete loss mitigation application. These momentary lodgings will considerably assist servicers by fixing regulatory doubts worrying the application of Regulation X to post-forbearance processes, and they will significantly decrease concerns connected with requirements to process total loss mitigation applications for loan deferrals. Given the high volumes of loans that are presently in COVID-related forbearances, we believe the benefits of this guideline are substantial.

In addition, the information in the IFR will remove a number of the lingering compliance uncertainties surrounding Government Sponsored Enterprise (GSE) programs that feature structured application treatments.2 Because other mortgage investors and insurance providers have revealed similar loss mitigation choices, and given that extra main and secondary market entities are likely to use GSE designs as design templates for their own COVID forbearance programs, we think this IFR will have a robust positive influence on markets and consumers.

However, ABA suggests extra changes to the IFR that will even more assist debtors and servicers during this unprecedented time and much better accomplish the Bureau's objectives. We discuss these suggestions listed below.

Additional Recommendations:

First, 12 CFR 1024.41(c)( 2 )(v)(B) provides that a servicer does not have to send out a loss mitigation application acknowledgment letter or adhere to the sensible diligence responsibilities to assist a borrower complete an application" [o] nce the customer accepts a deal made pursuant to" the IFR. While ABA completely supports the Bureau's objective of lowering problems on servicers throughout these uncertain times and thinks this is entirely appropriate under the situations, we do not believe the guideline, as written, will have the desired effect. Many, perhaps most, of the discussions where a servicer evaluates and uses a deferral plan will be considered a loss mitigation application pursuant to Regulation X, which would generally set off the requirement to send out an acknowledgment letter within 5 company days. Following these conversations, servicers can not wait to see if the borrower accepts the deferral deal before figuring out whether it needs to satisfy the acknowledgment letter requirements. Practically speaking, it would seem that the only time in which the interim final 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 deferral offer 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 recommendation letter timeline to 5 organization days after a debtor turns down any deferment offer.

Second, in order to qualify as a deferment under the IFR, a servicer must "waive [] all existing late charges, penalties, stop payment fees, or comparable charges without delay upon the customer's acceptance of the loss mitigation choice." As composed, it appears that servicers must waive all of these amounts, even if the charges or costs were accumulated or evaluated long before the COVID-19 pandemic. For instance, a borrower might have a late charge from 2018 that is outstanding. However, in order to certify for this option under the IFR, the servicer will have to accept waive that fee.

ABA believes that needing the waiver of any amounts that were accrued or evaluated pre-COVID is unreasonable, approximate, and will likely act as a significant deterrent to using a deferral plan. ABA prompts the Bureau to clarify that the waiver applies only to quantities accrued or examined as an outcome of a payment that was not paid because of a financial hardship due, directly or indirectly, to the COVID-19 emergency.

Additionally, the phrase "similar charges" in the IFR is uncertain and is generating substantial confusion in the market. ABA asks the Bureau to think about eliminating this expression or, in the alternative, clarify it. ABA presumes that the Bureau did not plan for this arrangement to need servicers to waive 3rd party expenditures that are typically allowed to be passed onto borrowers-expenses such as residential or commercial property evaluation charges, residential or commercial property preservation costs, foreclosure lawyer charges, and the like. 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 particularly interested in whether the amendments properly stabilize providing versatility to servicers to offer relief rapidly throughout the COVID-19 emergency with providing crucial securities for debtors engaged in the loss mitigation application process, such as securities from foreclosure.

ABA believes that the Bureau has properly well balanced consumer defense and functional performance. ABA agrees with the Bureau's evaluation that extra flexibilities are proper throughout the remarkable scenarios provided by the COVID-19 emergency. The structured application treatments set forth in the IFR assistance guarantee that servicers have the resources to attend to the remarkably large number of debtors that will exit forbearances in the coming months. The guideline sufficiently stabilizes these streamlined processes with customer securities. The special payment deferment programs advanced by the Federal Housing Finance Agency (FHFA) and other entities will permit eligible borrowers to avoid the danger of losing their homes, and permit them to resume repaying their mortgage loans without incurring a delinquency or additional charges or interest, and the programs offer alternatives on how to repay the forborne quantity that servicers have deferred. This interim rule ensures that the consumer benefits and protections meant by these nationwide programs are efficiently guaranteed as a condition to any regulatory benefits supplied.

The Bureau also looks for talk about whether to require written disclosures for this, or any similar exceptions that the Bureau may authorize in the future.

Most lenders memorialize the transaction with a deal letter to the debtor. This letter is a basic and concise confirmation of the loss mitigation option and testimony that the payments postponed will result in the forborne quantities being due at re-finance, sale, or benefit of the loan. ABA would not advise a short-term offer disclosure as an extra requirement during catastrophes or emergencies. This requirement would increase the problem and slow the relief the servicer is using to their debtors. In addition, it may confound the consumer with unneeded types at a demanding point while doing so.

The Bureau also looks for discuss whether the Bureau need to extend the exception established in new § 1024.41(c)( 3 )(v) to other post-forbearance loss mitigation options made readily available to borrowers affected by other types of catastrophes and emergency situations.

ABA thinks the advantages managed under this IFR ought to be broadened to other post-forbearance loss mitigation options developed to ease COVID-affected debtors and likewise to debtors impacted by other kinds of catastrophes and emergencies. The VA, USDA and FHA offer viable loan modification options, such as improve adjustments, that are not covered under this exemption, as well other Fannie Mae and Freddie Mac loss mitigation solutions, such as Flex Mods. We believe these choices are all helpful to the consumer and ought to be offered in an effective and structured manner during this emergency and other catastrophes and emergencies.

These other adjustment alternatives would not qualify under the interim guideline mainly due to the fact that of the restriction on interest accrual on delayed payments and the requirement that the covered amounts need to be repaid at the end of the loan term. We see no valid factor to omit these valuable COVID-19 programs from the menu of options readily available to consumers based upon an insufficient loss mitigation application. Some customers will not get approved for the payment deferment alternatives, and additional alternatives will be essential to ensure relief for all customers.

ABA advises that the Bureau modify the requirements under 1024.41(c)( 2 )(v)(A)( 2) so that the relief supplied by the rule can be used for other kinds of loss mitigation options. This small information would substantially expand customer options that are necessary during the COVID-19 pandemic in addition to other catastrophes and emergencies.

The Bureau has no reason to think that the additional versatility provided to covered individuals by this interim last rule would differentially affect consumers in backwoods. The Bureau requests comment concerning the effect of the amended arrangements on customers in rural areas and how those effects might vary from those experienced by consumers generally.

ABA does not see the need for additional versatility in the IFR for servicers in rural areas.

Conclusion:

ABA values the chance to talk about this proposition. 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.