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The American Bankers Association (ABA) values the opportunity to comment on the Consumer Financial Protection Bureau's (Bureau) interim last guideline (IFR) affecting the treatment of specific COVID-19 related Loss Mitigation Options under RESPA and Reg. X. ABA appreciates the Bureau's understanding of the complex problems facing mortgage borrowers and servicers during the COVID-19 pandemic and the Bureau's effort to provide momentary solutions that help with servicer alternatives to help pandemic-affected customers. ABA thinks that the IFR provides an efficient balance of debtor securities and servicer flexibility, which will benefit both consumers and industry considerably.

Summary of the Comment:

ABA highly supports the IFR's arrangements that change Regulation X to allow mortgage servicers to use momentarily specific loss mitigation choices without getting a total loss mitigation application. These temporary lodgings will significantly help servicers by dealing with regulative doubts worrying the application of Regulation X to post-forbearance processes, and they will substantially lower concerns connected with requirements to process complete loss mitigation applications for loan deferrals. Given the high volumes of loans that are currently in COVID-related forbearances, we believe the advantages of this guideline are considerable.

In addition, the information in the IFR will remove numerous of the remaining compliance unpredictabilities surrounding Government Sponsored Enterprise (GSE) programs that include structured application procedures.2 Because other mortgage investors and insurance companies have revealed similar loss mitigation choices, and because additional main and secondary market entities are likely to utilize GSE models as design templates for their own COVID forbearance programs, we believe this IFR will have a robust positive influence on markets and customers.

However, ABA suggests extra modifications to the IFR that will even more assist borrowers and servicers throughout this extraordinary time and better achieve the Bureau's objectives. We talk about these suggestions below.

Additional Recommendations:

First, 12 CFR 1024.41(c)( 2 )(v)(B) supplies that a servicer does not need to send a loss mitigation application acknowledgment letter or comply with the sensible diligence commitments to help a customer complete an application" [o] nce the customer accepts an offer made pursuant to" the IFR. While ABA fully supports the Bureau's goal of lowering problems on servicers during these uncertain times and thinks this is wholly appropriate under the circumstances, we do not think the rule, as composed, will have the intended impact. Many, perhaps most, of the conversations in which a servicer examines and offers a deferral plan will be considered a loss mitigation application pursuant to Regulation X, which would normally set off the requirement to send out a recommendation letter within 5 business days. Following these discussions, servicers can not wait to see if the debtor accepts the deferral offer before determining whether it requires to satisfy the acknowledgment letter requirements. Practically speaking, it would seem that the only time in which the interim final rule would allow a servicer to forgo the recommendation letter requirements is if the borrower is permitted to, and in turn does, accept the deferment deal on the preliminary phone conversation with the servicer. To accomplish what we presume to be the Bureau's intent, ABA advises that the Bureau move the recommendation letter timeline to five organization days after a debtor declines any deferral 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 immediately upon the customer's acceptance of the loss mitigation option." As written, it appears that servicers need to waive all of these quantities, even if the charges or costs were accrued or examined long before the COVID-19 pandemic. For example, a debtor could have a late charge from 2018 that is impressive. However, in order to receive this option under the IFR, the servicer will have to accept waive that charge.

ABA thinks that requiring the waiver of any quantities that were accumulated or evaluated pre-COVID is unreasonable, arbitrary, and will likely serve as a substantial deterrent to using a deferral strategy. ABA urges the Bureau to clarify that the waiver applies just to quantities accrued or examined as an outcome of a payment that was not paid due to the fact that of a monetary challenge due, directly or indirectly, to the COVID-19 emergency situation.

Additionally, the expression "comparable charges" in the IFR is uncertain and is producing considerable confusion in the industry. ABA asks the Bureau to think about removing this phrase or, in the alternative, clarify it. ABA presumes that the Bureau did not intend for this arrangement to require servicers to waive 3rd celebration expenditures that are usually permitted to be passed onto borrowers-expenses such as residential or commercial property assessment charges, residential or commercial property preservation charges, foreclosure attorney costs, and so on. At a minimum, ABA respectfully demands that the Bureau think about clarifying that the provision does not cover these kinds of expenses/charges.

ABA Responses to Specific Requests for Comment:

The Bureau is particularly thinking about whether the amendments properly balance providing flexibility to servicers to offer relief quickly during the COVID-19 emergency with providing important securities for borrowers taken part in the loss mitigation application procedure, such as protections from foreclosure.

ABA believes that the Bureau has properly balanced consumer defense and operational efficiency. ABA concurs with the Bureau's assessment that extra versatilities are appropriate throughout the remarkable situations presented by the COVID-19 emergency situation. The structured application procedures set forth in the IFR aid ensure that servicers have the resources to deal with the remarkably large number of customers that will leave forbearances in the coming months. The guideline effectively stabilizes these streamlined procedures with consumer securities. The special payment deferral programs advanced by the Federal Housing Finance Agency (FHFA) and other entities will permit qualified debtors to prevent the threat of losing their homes, and enable them to resume repaying their mortgage loans without incurring a delinquency or extra fees or interest, and the programs offer alternatives on how to repay the forborne amount that servicers have actually delayed. This interim rule assures that the customer advantages and protections meant by these national programs are successfully guaranteed as a condition to any regulatory benefits offered.

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

Most lenders memorialize the transaction with a deal letter to the debtor. This letter is a basic and concise verification of the loss mitigation service and statement that the payments postponed will result in the forborne quantities being due at refinance, sale, or benefit of the loan. ABA would not advise a short-term offer disclosure as an extra requirement throughout disasters or emergencies. This requirement would increase the concern and slow the relief the servicer is providing to their customers. In addition, it might confound the consumer with unneeded kinds at a demanding point at the same time.

The Bureau also seeks remark on whether the Bureau should extend the exception established in new § 1024.41(c)( 3 )(v) to other post-forbearance loss mitigation options made readily available to debtors affected by other kinds of disasters and emergencies.

ABA thinks the advantages managed under this IFR must be broadened to other post-forbearance loss mitigation options created to eliminate COVID-affected customers and also to debtors impacted by other types of disasters and emergencies. The VA, USDA and FHA use viable loan modification alternatives, such as improve modifications, 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 choices are all helpful to the consumer and should be readily available in an efficient and streamlined manner throughout this emergency situation and other disasters and emergencies.

These other modification choices would not qualify under the interim rule 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 paid back at the end of the loan term. We see no valid reason to leave out these important COVID-19 programs from the menu of choices offered to consumers based upon an insufficient loss . Some borrowers will not certify for the payment deferral options, and additional choices will be vital to assure relief for all consumers.

ABA suggests that the Bureau customize the criteria under 1024.41(c)( 2 )(v)(A)( 2) so that the relief offered by the rule can be used for other types of loss mitigation solutions. This little information would significantly expand customer choices that are essential throughout the COVID-19 pandemic as well as other disasters and emergencies.

The Bureau has no reason to believe that the additional versatility provided to covered persons by this interim final guideline would differentially affect consumers in backwoods. The Bureau demands comment relating to the effect of the amended provisions on customers in rural areas and how those effects might differ from those experienced by customers normally.

ABA does not see the need for extra versatility in the IFR for servicers in rural locations.

Conclusion:

ABA appreciates the opportunity to comment on this proposal. If you have any concerns about the content of this letter, please contact Sharon Whitaker at 202-663-5321 or Rod Alba at 202-663-5592.