A joint release from the Consumer Financial Protection Bureau (CFPB) and the Conference of State Bank Supervisors cautions mortgage servicers about their obligations in complying with the Coronavirus Aid, Relief and Economic Security (CARES) Act. The Act includes provisions granting a right to forbearance to mortgaged homeowners impacted by the COVID-19 pandemic.
Under these provisions, servicers of federally-backed mortgages including those from the GSEs Fannie Mae and Freddie Mac as well as FHA, the VA, and USDA must grant forbearance to borrowers with pandemic-related hardships for as long as two consecutive 180-day periods during the National Emergency declared in response to the outbreak.
Servicers are advised by CFPB and the Supervisors that they can approve a shorter than 180-day plan, but only at the borrowers request and acceptance. In such cases, the servicers must default to 180 days if the borrower subsequently requests a longer forbearance period.
Forbearance must be granted by servicers to borrowers who request it and provide servicers with attestation to a financial hardship caused by the emergency. Servicers are not permitted to require any additional documentation of hardship. Servicers who fail to grant properly requested forbearance, steer borrowers away from or misled them about it may not be in compliance with the Act. Furthermore, additional interest, fees, or penalties beyond the amounts scheduled or calculated should be waived with no negative impact to the borrower's mortgage contract during the forbearance.
Examiners will evaluate communications between borrowers and their servicers, including the servicer's communication of repayment options for legal compliance or resulting consumer harm. A servicer that offers very limited repayment options when others are reasonably available could, depending on the facts and circumstances, be at risk of legal violation or causing consumer harm.
Loan originators are also subject to CARES Act provisions. They must be careful about any closing attestations, notices, or other communications that might discourage borrowers from seeking forbearance after their loans close or mislead them about their rights to do so. Examiners will evaluate originator communications with borrowers for compliance or causing consumer harm.
The release warns that the CARES Act interacts with multiple rules or guidelines from regulators and the results may not always be clear. The full document provides a list of these and is available at https://files.consumerfinance.