CFPB gives mortgage servicers relief to help struggling homeowners

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The Consumer Financial Protection Bureau will give mortgage servicers limited regulatory cover to offer forbearance and loss-mitigation options to their customers suffering financial hardship due to the coronavirus pandemic.

In an interim final rule published Tuesday and taking effect July 1, the bureau will waive its requirement that loss-mitigation options only be extended to customers who have submitted a complete loss-mitigation application. Borrowers facing temporary hardships would benefit from a quicker and more efficient application process, the CFPB said.

The rule "makes it clear that servicers do not violate Regulation X by offering certain COVID-19-related loss-mitigation options based on an evaluation of limited application information collected from the borrower,” the CFPB said in a press release.

Regulation X of the Real Estate Settlement Procedures Act requires that loss-mitigation and forbearance options only be extended to borrowers who complete an application for such relief. Tuesday's interim final rule would allow mortgage servicers to extend that relief sooner if they meet certain criteria that benefit struggling borrowers.

"There are circumstances where Regulation X may require a servicer to collect a complete application from a borrower before offering this type of program," the rule says. "However, that result may not serve the particular needs of borrowers and servicers during the COVID-19 emergency."

To qualify for the exemption during the pandemic, servicers must meet three criteria. Servicers must allow a borrower who became delinquent to delay all principal and interest payments; refrain from charging any fees or accrued interest while the relief is in place; and ensure that acceptance of a loss-mitigation offer resolves the borrower's delinquency status.

The exception from Regulation X is not limited to borrowers who received forbearance plans under the coronavirus rescue package enacted earlier this year, and thus extends beyond those mortgages held by Fannie Mae, Freddie Mac, the Federal Housing Administration or any other federal agency.

The CFPB will accept comments on the interim final rule for 45 days after its publication in the Federal Register.

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