CFPB proposes end to pandemic servicing requirement

The Consumer Financial Protection Bureau published a proposed rule in the Federal Register on Friday that could scale back some procedures added for mortgaged homeowners with hardships due to COVID-19.

The temporary requirements added during the pandemic have largely sunset, and one aspect that has not is on track to be addressed by a planned revision to broader regulation, according to the proposal Russell Vought, acting director of the Consumer Financial Protection Bureau, authorized.

"In light of the end of the COVID-19 pandemic, these regulations needlessly complicate Regulation X 

without commensurate benefits," Russell Vought, acting director at the Consumer Financial Protection Bureau, said in the proposed rule.

The proposed change, in line with the Trump administration deregulatory agenda, is an example of how some rules the CFPB is planning to roll back are being processed through Federal Register publication and comment periods. The 30-day comment period for this change ends June 16.

One sticking point in rolling back the rule may be the flexibility some in the industry have been using in the section that hasn't officially expired, according to law firm Bradley Arant Boult Cummings.

"In our opinion, the CFPB is understating the impact of rescinding the anti-evasion exception for some loan modifications," Jonathan Kolodziej and Jason Bushby, attorneys at the law firm, wrote in commentary posted on its website.

The attorneys showed concern that servicers have been using that aspect of the 2021 final rule to "continue offering certain loan modification options in a streamlined fashion" and rescinding it could require procedural change.

The proposed 2024 revision of the larger Reg X that governs servicing — which would have removed the temporary pandemic contingencies — addressed that concern, according to the bureau. 

The bureau promised it will pick up where it left off and review previous feedback "received in response to the 2024 proposed rule, including comments related to applying the loss mitigation lessons learned from the COVID-19 pandemic."

Two other parts of the 2021 rule that have already sunsetted were some temporary borrower contact requirements and extra steps before starting foreclosure.

The early intervention requirements ended Oct. 1, 2022 and the additional pre-foreclosure procedures only applied to loans to foreclosure starts before Jan. 1 of that same year.