CFPB Issues Notice of Proposed Rulemaking to Amend Regulation X

The CFPB recently issued a notice of proposed rulemaking and request for comment to amend Regulation X to assist borrowers affected by the COVID-19 pandemic.  Comments must be submitted before May 11, 2021.

The proposed rule would amend the 2021 Mortgage Servicing COVID-19 Proposed Rule, discussed in a prior WBK article, which would revise the existing Mortgage Servicing Rule provisions to provide additional assistance for borrowers experiencing a COVID-19-related hardship.  Among other things, the proposed rule would do the following:

  • Define a “COVID-19-related hardship” as a financial hardship due, directly or indirectly, to the COVID-19 emergency, as defined in the CARES Act.
  • Add a temporary, additional early intervention live contact requirements during the COVID-19 emergency, to be in effect for one year after the proposed effective date.  With respect to borrowers not in a forbearance program at the time of the live contact, the servicer would be required to ask whether the borrower is experiencing a COVID-19-related hardship if forbearance options are available to the borrower through the servicer.  If the borrower indicates they are experiencing such a hardship, the servicer must list and describe available forbearance programs and the actions a borrower must take to be evaluated for such programs.  With respect to borrowers who are in a forbearance program at the time of live contact, the servicer would be required to provide specific information about the borrower’s current forbearance program during the last required live contact made prior to the end of the forbearance period.  The servicer must also list and describe available post-forbearance loss mitigation options and the actions a borrower must take to be evaluated for such options.
  • Clarify servicers’ reasonable diligence obligations, modify the existing prohibition on offering a loss mitigation option based on an evaluation of an incomplete loss mitigation, and authorize servicers to offer certain loan modifications based on the evaluation of an incomplete application if certain criteria are met.
  • Create a temporary COVID-19 emergency pre-foreclosure review period to prohibit servicers from making the required first notice or filing for any judicial or non-judicial foreclosure process until after December 31, 2021.  This prohibition would exist in addition to the existing requirement prohibiting a servicer from making the required first notice or filing until a borrower’s mortgage loan obligation is more than 120 days delinquent.

The Notice of Proposed Rulemaking also clarifies that the CFPB does not anticipate that the above, temporary requirements will be needed in perpetuity in light of the temporary nature of the current crisis.