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The American Bankers Association (ABA) values the opportunity to discuss the Consumer Financial Protection Bureau's (Bureau) interim final rule (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 complex concerns dealing with mortgage debtors and servicers throughout the COVID-19 pandemic and the Bureau's effort to provide momentary solutions that facilitate servicer alternatives to assist pandemic-affected customers. ABA thinks that the IFR offers an effective balance of borrower securities and servicer flexibility, which will benefit both consumers and industry substantially.

Summary of the Comment:
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ABA highly supports the IFR's arrangements that change Regulation X to permit mortgage servicers to use momentarily certain loss mitigation alternatives without getting 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 burdens related to requirements to process complete loss mitigation applications for loan deferments. Given the high volumes of loans that are currently in COVID-related forbearances, we think the advantages of this guideline are considerable.

In addition, the information in the IFR will get rid of much of the sticking around compliance unpredictabilities surrounding Government Sponsored Enterprise (GSE) programs that include structured application procedures.2 Because other mortgage investors and insurance companies have actually announced similar loss mitigation options, and given that extra primary and secondary market entities are likely to utilize GSE models as design templates for their own COVID forbearance programs, we think this IFR will have a robust positive effect on markets and customers.

However, ABA advises additional changes to the IFR that will even more help borrowers and servicers during this unmatched time and much better achieve the Bureau's goals. We discuss these suggestions below.

Additional Recommendations:

First, 12 CFR 1024.41(c)( 2 )(v)(B) provides that a servicer does not need to send a loss mitigation application acknowledgment letter or abide by the sensible diligence obligations to help a customer complete an application" [o] nce the borrower accepts a deal made pursuant to" the IFR. While ABA completely supports the Bureau's objective of decreasing problems on servicers during these unsure times and believes this is entirely proper under the situations, we do not think the rule, as composed, will have the intended result. Many, perhaps most, of the discussions where a servicer assesses and uses a deferral strategy will be considered a loss mitigation application pursuant to Regulation X, which would generally activate the requirement to send out a recommendation letter within five organization days. Following these discussions, servicers can not wait to see if the borrower accepts the deferral offer before identifying whether it requires to satisfy the recommendation letter requirements. Practically speaking, it would appear that the only time in which the interim final guideline would enable a servicer to pass up the recommendation letter requirements is if the borrower is permitted to, and in turn does, accept the deferral deal on the initial phone call with the servicer. To attain what we presume to be the Bureau's intent, ABA suggests that the Bureau shift the recommendation letter timeline to 5 company days after a debtor turns down any deferral deal.

Second, in order to certify as a deferment under the IFR, a servicer should "waive [] all existing late charges, penalties, stop payment fees, or comparable charges promptly upon the borrower's approval of the loss mitigation alternative." As written, it appears that servicers need to waive all of these quantities, even if the charges or charges were accrued or evaluated long before the COVID-19 pandemic. For example, a customer could have a late cost from 2018 that is exceptional. However, in order to receive this choice under the IFR, the servicer will need to agree to waive that charge.

ABA thinks that requiring the waiver of any amounts that were accrued or evaluated pre-COVID is unreasonable, approximate, and will likely function as a significant deterrent to offering a deferral strategy. ABA urges the Bureau to clarify that the waiver uses just to amounts accumulated or assessed as an outcome of a payment that was not paid due to the fact that of a monetary challenge due, straight or indirectly, to the COVID-19 emergency.

Additionally, the expression "similar charges" in the IFR is unclear and is creating substantial confusion in the market. ABA asks the Bureau to think about removing this expression or, in the option, clarify it. ABA presumes that the Bureau did not mean for this arrangement to require servicers to waive 3rd party expenses that are generally allowed to be passed onto borrowers-expenses such as residential or commercial property examination fees, residential or commercial property conservation fees, foreclosure lawyer charges, and the like. At a minimum, ABA respectfully requests that the Bureau consider clarifying that the provision does not cover these kinds of expenses/charges.

ABA Responses to Specific Requests for Comment:

The Bureau is especially thinking about whether the amendments appropriately balance supplying versatility to servicers to use relief quickly throughout the COVID-19 emergency with offering important protections for debtors engaged in the loss mitigation application procedure, such as defenses from foreclosure.

ABA thinks that the Bureau has properly balanced customer protection and functional effectiveness. ABA concurs with the Bureau's evaluation that additional flexibilities are proper during the remarkable scenarios provided by the COVID-19 emergency situation. The streamlined application treatments set forth in the IFR aid guarantee that servicers have the resources to address the extremely a great deal of debtors that will leave forbearances in the coming months. The rule adequately stabilizes these streamlined procedures with consumer protections. The special payment deferral programs advanced by the Federal Housing Finance Agency (FHFA) and other entities will allow eligible borrowers to avoid the danger of losing their homes, and allow them to resume repaying their mortgage loans without incurring a delinquency or extra charges or interest, and the programs offer alternatives on how to repay the forborne quantity that servicers have postponed. This interim rule ensures that the customer benefits and protections intended by these nationwide programs are efficiently ensured as a condition to any regulatory benefits supplied.

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

Most lending institutions memorialize the deal with an offer letter to the customer. This letter is an easy and concise confirmation of the loss mitigation option and testament that the payments deferred will result in the forborne quantities being due at refinance, sale, or reward of the loan. ABA would not suggest a short-term deal disclosure as an extra requirement during catastrophes or emergencies. This requirement would increase the burden and slow the relief the servicer is using to their customers. In addition, it may confound the consumer with unneeded forms at a difficult point while doing so.

The Bureau also looks for comment on whether the Bureau ought to extend the exception developed in new § 1024.41(c)( 3 )(v) to other post-forbearance loss mitigation options made readily available to debtors affected by other kinds of catastrophes and emergencies.

ABA thinks the advantages managed under this IFR must be broadened to other post-forbearance loss mitigation options created to ease COVID-affected debtors and also to borrowers affected by other kinds of disasters and emergencies. The VA, USDA and FHA offer viable loan modification choices, such as streamline adjustments, that are not covered under this exemption, too other Fannie Mae and Freddie Mac loss mitigation solutions, such as Flex Mods. Our company believe these alternatives are all advantageous to the customer and must be available in an efficient and streamlined way throughout this emergency and other disasters and emergencies.

These other modification alternatives would not certify under the interim rule primarily since of the prohibition on interest accrual on delayed payments and the requirement that the covered amounts must be paid back at the end of the loan term. We see no valid reason to exclude these important COVID-19 programs from the menu of alternatives offered to consumers based upon an incomplete loss mitigation application. Some debtors will not qualify for the payment deferral choices, and additional alternatives will be important to guarantee relief for all customers.

ABA recommends that the Bureau customize the requirements under 1024.41(c)( 2 )(v)(A)( 2) so that the relief supplied by the rule can be utilized for other kinds of loss mitigation options. This little clarification would significantly broaden customer options that are essential throughout the COVID-19 pandemic in addition to other catastrophes and emergencies.

The Bureau has no factor to believe that the extra flexibility offered to covered individuals by this interim last guideline would differentially impact consumers in backwoods. The Bureau demands comment regarding the effect of the amended arrangements on customers in rural areas and how those impacts may differ from those experienced by customers normally.

ABA does not see the requirement for additional flexibility in the IFR for servicers in backwoods.
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Conclusion:

ABA appreciates the opportunity to comment on 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.