The American Bankers Association (ABA) values the opportunity to comment on the Consumer Financial Protection Bureau's (Bureau) interim last rule (IFR) affecting the treatment of certain COVID-19 related Loss Mitigation Options under RESPA and Reg. X. ABA appreciates the Bureau's understanding of the complicated issues facing mortgage borrowers and servicers throughout the COVID-19 pandemic and the Bureau's initiative to use momentary services that assist in servicer choices to help pandemic-affected customers. ABA thinks that the IFR offers an efficient balance of debtor securities and servicer versatility, which will benefit both customers and industry substantially.

Summary of the Comment:

ABA strongly supports the IFR's arrangements that modify Regulation X to permit mortgage servicers to offer briefly particular loss mitigation choices without obtaining a total loss mitigation application. These temporary lodgings will greatly assist servicers by solving regulative doubts worrying the application of Regulation X to post-forbearance processes, and they will considerably decrease concerns connected with requirements to process total 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 clarifications in the IFR will eliminate a lot of the remaining compliance unpredictabilities surrounding Government Sponsored Enterprise (GSE) programs that feature structured application procedures.2 Because other mortgage financiers and insurance providers have revealed comparable loss mitigation choices, and since additional primary and secondary market entities are likely to utilize GSE models as templates for their own COVID forbearance programs, we believe this IFR will have a robust favorable impact on markets and consumers.

However, ABA recommends extra changes to the IFR that will further assist customers and servicers during this extraordinary time and better attain the Bureau's goals. We discuss these suggestions listed below.

Additional Recommendations:

First, 12 CFR 1024.41(c)( 2 )(v)(B) offers that a servicer does not need to send out a loss mitigation application acknowledgment letter or comply with the affordable diligence obligations to assist a customer finish an application" [o] nce the debtor accepts a deal made pursuant to" the IFR. While ABA completely supports the Bureau's goal of decreasing concerns on servicers during these unpredictable times and believes this is completely suitable under the scenarios, we do not believe the rule, as composed, will have the intended impact. Many, perhaps most, of the discussions in which a servicer examines and uses a deferral strategy will be considered a loss mitigation application pursuant to Regulation X, which would ordinarily activate the requirement to send 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 please the acknowledgment letter requirements. Practically speaking, it would seem that the only time in which the last rule would permit a servicer to forgo the acknowledgment letter requirements is if the debtor is allowed to, and in turn does, accept the deferment offer on the preliminary telephone call with the servicer. To attain what we presume to be the Bureau's intent, ABA recommends that the Bureau shift the recommendation letter timeline to 5 organization days after a borrower declines any deferral deal.

Second, in order to certify as a deferment under the IFR, a servicer needs to "waive [] all existing late charges, charges, stop payment costs, or similar charges promptly upon the customer's acceptance of the loss mitigation choice." As composed, it appears that servicers need to waive all of these quantities, even if the charges or fees were accrued or assessed long before the COVID-19 pandemic. For instance, a customer might have a late charge from 2018 that is impressive. However, in order to receive this choice under the IFR, the servicer will need to consent to waive that fee.

ABA believes that requiring the waiver of any quantities that were accumulated or examined pre-COVID is unreasonable, approximate, and will likely act as a significant deterrent to offering a deferral strategy. ABA urges the Bureau to clarify that the waiver uses only to quantities accumulated or examined as an outcome of a payment that was not paid because of a monetary hardship due, straight or indirectly, to the COVID-19 emergency.

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

ABA Responses to Specific Requests for Comment:

The Bureau is especially thinking about whether the modifications properly balance providing versatility to servicers to use relief quickly during the COVID-19 emergency situation with supplying crucial defenses for borrowers participated in the loss mitigation application process, such as securities from foreclosure.

ABA believes that the Bureau has properly well balanced customer defense and operational efficiency. ABA agrees with the Bureau's evaluation that additional versatilities are appropriate during the remarkable circumstances presented by the COVID-19 emergency. The streamlined application treatments stated in the IFR aid ensure that servicers have the resources to address the incredibly a great deal of borrowers that will exit forbearances in the coming months. The rule properly stabilizes these streamlined processes with customer protections. The special payment deferral programs advanced by the Federal Housing Finance Agency (FHFA) and other entities will allow qualified customers to avoid the risk of losing their homes, and permit them to resume repaying their mortgage loans without incurring a delinquency or extra costs or interest, and the programs provide alternatives on how to repay the forborne quantity that servicers have delayed. This interim rule ensures that the consumer advantages and protections intended by these national programs are efficiently guaranteed as a condition to any regulatory advantages supplied.

The Bureau likewise seeks talk about whether to require written disclosures for this, or any comparable exceptions that the Bureau might 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 service and testament that the payments postponed will lead to the forborne quantities being due at re-finance, sale, or reward of the loan. ABA would not suggest a short-term offer disclosure as an additional requirement during catastrophes or emergencies. This requirement would increase the burden and slow the relief the servicer is providing to their borrowers. In addition, it may confuse the customer with unwanted kinds at a demanding point at the same time.

The Bureau likewise looks for comment on whether the Bureau must extend the exception established in new § 1024.41(c)( 3 )(v) to other post-forbearance loss mitigation options offered to customers affected by other types of disasters and emergency situations.

ABA thinks the benefits afforded under this IFR must be expanded to other post-forbearance loss mitigation options designed to ease COVID-affected borrowers and likewise to borrowers impacted by other kinds of catastrophes and emergencies. The VA, USDA and FHA use practical loan modification choices, such as improve modifications, that are not covered under this exemption, too other Fannie Mae and Freddie Mac loss mitigation services, such as Flex Mods. We believe these options are all advantageous to the consumer and should be readily available in an effective and structured manner throughout this emergency and other disasters and emergency situations.

These other modification alternatives would not qualify under the interim rule mainly since of the prohibition on interest accrual on delayed payments and the requirement that the covered quantities should be paid back at the end of the loan term. We see no valid reason to exclude these valuable COVID-19 programs from the menu of options offered to customers based upon an incomplete loss mitigation application. Some debtors will not receive the payment deferment alternatives, and extra alternatives will be crucial to assure relief for all customers.

ABA recommends that the Bureau customize the requirements under 1024.41(c)( 2 )(v)(A)( 2) so that the relief provided by the rule can be utilized for other kinds of loss mitigation services. This small clarification would considerably expand debtor options that are necessary during the COVID-19 pandemic in addition to other disasters and emergencies.

The Bureau has no factor to believe that the additional flexibility offered to covered persons by this interim last rule would differentially impact customers in rural areas. The Bureau requests comment regarding the impact of the changed provisions on consumers in rural areas and how those effects might differ from those experienced by customers typically.

ABA does not see the need for additional versatility in the IFR for servicers in backwoods.

Conclusion:

ABA values the opportunity to comment on this proposal. 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.