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The American Bankers Association (ABA) values the opportunity to comment on the Consumer Financial Protection Bureau's (Bureau) interim last rule (IFR) impacting the treatment of specific COVID-19 related Loss Mitigation Options under RESPA and Reg. X. ABA values the Bureau's understanding of the intricate concerns dealing with mortgage borrowers and servicers throughout the COVID-19 pandemic and the Bureau's initiative to offer momentary options that help with servicer options to help pandemic-affected debtors. ABA believes that the IFR provides a reliable balance of debtor defenses and servicer flexibility, which will benefit both consumers and market significantly.

Summary of the Comment:

ABA highly supports the IFR's provisions that change Regulation X to permit mortgage servicers to use briefly specific loss mitigation choices without getting a total loss mitigation application. These short-lived lodgings will considerably assist servicers by fixing regulative doubts concerning the application of Regulation X to post-forbearance processes, and they will significantly lower problems 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 benefits of this rule are substantial.

In addition, the information in the IFR will remove a lot of the remaining compliance uncertainties surrounding Government Sponsored Enterprise (GSE) programs that feature structured application treatments.2 Because other mortgage financiers and insurance companies have revealed comparable loss mitigation choices, and considering that extra main and secondary market entities are likely to use GSE models as design templates for their own COVID forbearance programs, we think this IFR will have a robust favorable effect on markets and consumers.

However, ABA suggests additional modifications to the IFR that will even more help borrowers and servicers during this extraordinary time and much better accomplish the Bureau's objectives. We go over these suggestions listed below.

Additional Recommendations:

First, 12 CFR 1024.41(c)( 2 )(v)(B) provides that a servicer does not have to send out a loss mitigation application recommendation letter or comply with the sensible diligence commitments to assist a customer complete an application" [o] nce the customer accepts a deal made pursuant to" the IFR. While ABA totally supports the Bureau's goal of reducing problems on servicers during these unsure times and believes this is completely appropriate under the situations, we do not believe the rule, as composed, will have the intended effect. Many, possibly most, of the conversations where a servicer assesses and offers a deferral plan will be thought about a loss mitigation application pursuant to Regulation X, which would ordinarily trigger the requirement to send a recommendation letter within five organization days. Following these discussions, servicers can not wait to see if the debtor accepts the deferral offer before identifying whether it needs to please the recommendation letter requirements. Practically speaking, it would seem that the only time in which the interim final rule would allow a servicer to give up the recommendation letter requirements is if the debtor is permitted to, and in turn does, accept the deferral offer on the preliminary phone conversation with the servicer. To achieve what we presume to be the Bureau's intent, ABA recommends that the Bureau move the acknowledgment letter timeline to 5 service days after a borrower declines any deferment deal.

Second, in order to qualify as a deferral under the IFR, a servicer must "waive [] all existing late charges, charges, stop payment costs, or comparable charges without delay upon the customer's approval of the loss mitigation choice." As composed, it appears that servicers must waive all of these quantities, even if the charges or fees were accumulated or examined long before the COVID-19 pandemic. For example, a customer could have a late charge from 2018 that is outstanding. However, in order to get approved for this option under the IFR, the servicer will need to accept waive that charge.

ABA believes that requiring the waiver of any amounts that were accumulated or examined pre-COVID is unreasonable, approximate, and will likely function as a substantial deterrent to offering a deferral plan. ABA urges the Bureau to clarify that the waiver applies only to quantities accrued or evaluated as a result of a payment that was not paid due to the fact that of a monetary challenge due, straight or indirectly, to the COVID-19 .

Additionally, the phrase "comparable charges" in the IFR is unclear and is creating considerable confusion in the market. ABA asks the Bureau to think about removing this expression or, in the alternative, clarify it. ABA presumes that the Bureau did not plan for this arrangement to require servicers to waive 3rd party costs that are typically allowed to be passed onto borrowers-expenses such as residential or commercial property assessment costs, residential or commercial property conservation fees, foreclosure attorney costs, and so forth. At a minimum, ABA respectfully requests that the Bureau consider 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 changes appropriately balance supplying versatility to servicers to offer relief quickly throughout the COVID-19 emergency with offering crucial protections for borrowers participated in the loss mitigation application process, such as defenses from foreclosure.

ABA believes that the Bureau has properly balanced customer security and functional effectiveness. ABA agrees with the Bureau's evaluation that additional flexibilities are proper during the extraordinary situations presented by the COVID-19 emergency. The streamlined application procedures set forth in the IFR assistance ensure that servicers have the resources to address the remarkably a great deal of customers that will exit forbearances in the coming months. The rule sufficiently stabilizes these streamlined processes with customer defenses. The unique payment deferral programs advanced by the Federal Housing Finance Agency (FHFA) and other entities will enable qualified customers to avoid the risk of losing their homes, and allow them to resume repaying their mortgage loans without sustaining a delinquency or additional fees or interest, and the programs offer alternatives on how to repay the forborne amount that servicers have actually delayed. This interim guideline guarantees that the consumer advantages and protections planned by these nationwide programs are effectively ensured as a condition to any regulative benefits offered.

The Bureau also seeks discuss whether to require written disclosures for this, or any comparable exceptions that the Bureau might license in the future.

Most loan providers memorialize the transaction with a deal letter to the customer. This letter is a basic and concise verification of the loss mitigation service and testimony that the payments postponed will lead to the forborne amounts being due at re-finance, sale, or payoff of the loan. ABA would not advise a short-term deal disclosure as an additional requirement throughout disasters or emergencies. This requirement would increase the concern and slow the relief the servicer is using to their customers. In addition, it may confound the consumer with unnecessary kinds at a stressful point while doing so.

The Bureau likewise seeks discuss whether the Bureau should extend the exception developed in brand-new § 1024.41(c)( 3 )(v) to other post-forbearance loss mitigation alternatives offered to customers impacted by other types of disasters and emergency situations.

ABA thinks the advantages managed under this IFR must be expanded to other post-forbearance loss mitigation options designed to relieve COVID-affected customers and also to debtors impacted by other types of disasters and emergencies. The VA, USDA and FHA provide viable loan modification alternatives, such as simplify adjustments, that are not covered under this exemption, as well other Fannie Mae and Freddie Mac loss mitigation services, such as Flex Mods. Our company believe these options are all helpful to the customer and must be readily available in an effective and streamlined manner during this emergency and other catastrophes and emergency situations.

These other adjustment choices would not qualify under the interim guideline primarily since of the prohibition on interest accrual on postponed payments and the requirement that the covered amounts need to be repaid at the end of the loan term. We see no legitimate reason to omit these important COVID-19 programs from the menu of alternatives offered to consumers based upon an insufficient loss mitigation application. Some debtors will not get approved for the payment deferment choices, and additional choices will be crucial to guarantee relief for all consumers.

ABA suggests that the Bureau customize the criteria under 1024.41(c)( 2 )(v)(A)( 2) so that the relief provided by the guideline can be used for other kinds of loss mitigation services. This small explanation would considerably broaden customer options that are needed throughout the COVID-19 pandemic in addition to other catastrophes and emergencies.

The Bureau has no factor to think that the extra flexibility used to covered persons by this interim last rule would differentially impact consumers in rural areas. The Bureau demands comment relating to the effect of the amended arrangements on consumers in rural areas and how those effects might vary from those experienced by consumers normally.

ABA does not see the requirement for extra versatility in the IFR for servicers in backwoods.

Conclusion:

ABA values the opportunity to discuss 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.