On April 1, 2021, acting Director of the Consumer Financial Protection Bureau (CFPB), David Uejio, fired a shot across the bow of mortgage servicers in the form of a Compliance Bulletin and Policy Guidance (Bulletin). A copy of the Bulletin can be found here.
As the mortgage industry is well aware, there are millions of borrowers currently in default of their mortgage obligations. This could lead to a flood of foreclosures when forbearance periods end later this year.
In no uncertain terms, the Bulletin warns that the CFPB will be keeping an eye on how mortgage servicers respond to borrower requests for loss mitigation assistance and process loss mitigation applications. Among other things, the CFPB will consider a servicer’s overall effectiveness at reducing avoidable foreclosures (along with other relevant factors) in using its discretion to address violations of federal consumer financial law in supervisory and enforcement matters.
In other words, the CFPB expects mortgage servicers to take all necessary steps to prevent a wave of avoidable foreclosures. Unpreparedness will not be acceptable.
The CFPB also issued a press release along with the Bulletin, noting (among other things) that the CFPB will be paying particular attention to how mortgage servicers are doing the following:
- Being proactive. Servicers should contact borrowers in forbearance before the end of the forbearance period so they have time to apply for help.
- Working with borrowers. Servicers should work to ensure borrowers have all necessary information and should help borrowers in obtaining documents and other information needed to evaluate the borrowers for assistance.
- Addressing language access. The CFPB will look carefully at how servicers manage communications with borrowers with limited English proficiency and maintain compliance with the Equal Credit Opportunity Act and other laws.
- Evaluating income fairly. Where servicers use income in determining eligibility for loss mitigation options, servicers should evaluate borrowers’ income from public assistance, child support, alimony or other sources in accordance with the Equal Credit Opportunity Act’s anti-discrimination protections.
- Handling inquiries promptly. The CFPB will closely examine servicer conduct where hold times are longer than industry averages.
- Preventing avoidable foreclosures. The CFPB will expect servicers to comply with foreclosure restrictions in Regulation X and other federal and state restrictions in order to ensure that all homeowners have an opportunity to save their homes before foreclosure is initiated.
Accordingly, now is the time for mortgage servicers to consider evaluating mortgage servicing operations, including applicable policies, procedures, controls, staffing and other resources if they want to avoid being across the table from the CFPB in supervisory and enforcement matters.
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