[Federal Register Volume 86, Number 65 (Wednesday, April 7, 2021)]
[Rules and Regulations]
[Pages 17897-17899]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-07098]



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 Rules and Regulations
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  Federal Register / Vol. 86, No. 65 / Wednesday, April 7, 2021 / Rules 
and Regulations  

[[Page 17897]]



BUREAU OF CONSUMER FINANCIAL PROTECTION

12 CFR Part 1024


Bulletin 2021-02: Supervision and Enforcement Priorities 
Regarding Housing Insecurity

AGENCY: Bureau of Consumer Financial Protection.

ACTION: Compliance bulletin and policy guidance.

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SUMMARY: The Bureau of Consumer Financial Protection (Bureau) is 
issuing this Compliance Bulletin and Policy Guidance (Bulletin) on 
Supervision and Enforcement priorities regarding housing insecurity in 
light of heightened risks to consumers needing loss mitigation 
assistance in the coming months as the COVID-19 foreclosure moratoriums 
and forbearances end. Consequently, the Bureau will be paying 
particular attention to how mortgage servicers respond to borrower 
requests for loss mitigation assistance and process loss mitigation 
applications. The Bureau urges servicers to dedicate sufficient 
resources and staff to ensure they can communicate clearly with 
borrowers, effectively manage borrower requests for assistance, promote 
loss mitigation, and ultimately reduce avoidable foreclosures and 
foreclosure-related costs. Accordingly, the Bureau intends to consider 
a servicer's overall effectiveness at achieving such goals, along with 
other relevant factors, in using its discretion to address violations 
of Federal consumer financial law in supervisory and enforcement 
matters. The Bureau recognizes that some homeowners will not be able to 
resume making payments on their mortgages and that some foreclosures 
are unavoidable; nonetheless, the Bureau will hold mortgage servicers 
accountable for complying with Regulation X with the aim of ensuring 
that homeowners have the opportunity to be evaluated for loss 
mitigation prior to the initiation of foreclosure.

DATES: This bulletin is applicable on April 7, 2021.

FOR FURTHER INFORMATION CONTACT: Allison Brown, Deputy Assistant 
Director, Office of Supervision Policy, Division of Supervision, 
Enforcement, and Fair Lending, at (202) 435-7107, or James Savage, 
Senior Counsel, Office of Enforcement, at (202) 734-2777. If you 
require this document in an alternative electronic format, please 
contact [email protected].

SUPPLEMENTARY INFORMATION:

I. Background

    Mortgage servicers play a vital role in assisting borrowers when 
they face challenges in paying their mortgages. The Bureau is committed 
to using its authorities, including its authority under Regulation X 
mortgage servicing requirements and under the Consumer Financial 
Protection Act (CFPA), to ensure that homeowners facing the ongoing 
economic impact of the Coronavirus Disease (COVID-19) national 
emergency receive the benefits of critical legal protections and that 
avoidable foreclosures are avoided.
    On March 27, 2020, the Coronavirus Aid, Relief, and Economic 
Security Act (CARES Act) was signed into law.\1\ Among other things, 
the CARES Act provides borrowers with ``Federally backed mortgage 
loans'' with access to forbearance options regardless of whether they 
are delinquent.\2\ The Bureau understands from its market monitoring 
that many private investors have also provided forbearances on similar 
terms to those provided by servicers of federally backed loans.
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    \1\ Coronavirus Aid, Relief, and Economic Security Act, Public 
Law 116-136, 134 Stat. 281 (Mar. 27, 2020).
    \2\ The CARES Act defines a ``Federally backed mortgage loan'' 
as any loan which is secured by a first or subordinate lien on 
residential real property (including individual units of 
condominiums and cooperatives) designed principally for the 
occupancy of from one-to-four families that is insured by the 
Federal Housing Administration under title II of the National 
Housing Act (12 U.S.C. 1707 et seq.); insured under section 255 of 
the National Housing Act (12 U.S.C. 1715z-20); guaranteed under 
section 184 or 184A of the Housing and Community Development Act of 
1992 (12 U.S.C. 1715z-13a, 1715z-13b); guaranteed or insured by the 
Department of Veterans Affairs; guaranteed or insured by the 
Department of Agriculture; made by the Department of Agriculture; or 
purchased or securitized by the Federal Home Loan Mortgage 
Corporation or the Federal National Mortgage Association. CARES Act, 
Public Law 116-136, section 4022(a)(2).
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    Since the CARES Act was enacted, 6.9 million borrowers have entered 
a forbearance program. As of January 2021, more than 2.1 million 
borrowers in forbearance programs were more than 90 days behind on 
their mortgage payments (including borrowers who have forborne three or 
more payments), and they could still be experiencing severe hardships 
when their payments are to resume.\3\ Black and Hispanic homeowners 
were more than two times as likely to be behind on housing payments as 
of December 2020.\4\
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    \3\ Bureau of Consumer Fin. Prot., Housing insecurity and the 
COVID-19 pandemic (March 2021), https://files.consumerfinance.gov/f/documents/cfpb_Housing_insecurity_and_the_COVID-19_pandemic.pdf.
    \4\ Id.
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    Of the borrowers not in forbearance programs, as of January 2021, 
around 242,000 were 90 days or more delinquent. Both populations of 
delinquent borrowers are at heightened risk of referral to foreclosure 
soon after the foreclosure moratoria end if they do not resolve their 
delinquency or reach a loss mitigation agreement with their servicer. 
If borrowers who are currently in an eligible forbearance program 
request an extension to the maximum time offered by the government 
agencies, those loans that were placed in a forbearance program early 
in the pandemic (March and April 2020) will reach the end of their 
forbearance period in September and October of 2021. Black Knight data 
suggests there could be just under 1.7 million borrowers still in 
forbearance in September 2021, with roughly 800,000 borrowers exiting 
their forbearance programs after 18 months of forborne payments in 
September and October of 2021.\5\
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    \5\ Black Knight Mortg. Monitor, January 2021 Report at 9 (Jan. 
2021), https://cdn.blackknightinc.com/wp-content/uploads/2021/03/BKI_MM_Jan2021_Report.pdf (Black Jan. 2021 Report). It is unclear 
how many borrowers in a forbearance program will exit forbearance at 
12 months rather than exercising any additional extensions.
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    Borrowers facing more permanent hardships will likely need to apply 
for loss mitigation options as the end of the forbearances periods 
approach.\6\

[[Page 17898]]

Therefore, as consumers approach the end of forbearance periods in the 
coming months, the Bureau expects an extraordinarily high volume of 
loans needing loss mitigation assistance at relatively the same time. 
During this period in which there may be large increases in requests 
for loss mitigation assistance, the Bureau is specifically concerned 
that some borrowers may not be receiving effective communication from 
servicers and that some borrowers may be at risk of not having their 
loss mitigation applications adequately processed.
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    \6\ Mortgage Market COVID 19 Collaborative: Forbearance and 
Delinquency Among Agency Mortgage Loans, Housing Finance Policy 
Center, Urban Institute (March 2021).
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    In the wake of the COVID-19 pandemic, the Bureau has taken numerous 
steps to protect and assist mortgage borrowers. The Bureau has created 
and disseminated extensive consumer education resources in coordination 
with Federal agencies and State regulators. The Bureau plans to use all 
of its tools, including consumer and industry outreach and regulatory 
initiatives, to protect homeowners and assist those mortgage servicers 
who are also working to reduce avoidable foreclosures. The Bureau 
recognizes that mortgage servicers have also experienced challenges as 
a result of the pandemic and intends to support servicers in their 
efforts to provide timely assistance to mortgage borrowers.

II. Supervision and Enforcement Priorities

    The Bureau plans to monitor servicers' engagement with borrowers at 
all stages in the process in the coming months and prioritize mortgage 
servicing oversight work in deploying its enforcement and supervision 
resources in the coming year. The Bureau expects servicers to plan for 
the expected increase in loans exiting forbearance programs and related 
loss mitigation applications, as well as applications by borrowers who 
are delinquent but not in forbearance. The Bureau expects servicers to 
resource those activities appropriately and urges servicers to dedicate 
sufficient resources and staff to ensure they can communicate clearly 
with borrowers, effectively manage borrower requests for assistance, 
and thereby reduce foreclosures. Accordingly, the Bureau intends to 
look at a servicer's overall effectiveness at helping consumers manage 
loss mitigation, along with other relevant factors, when using its 
discretion to address violations of Federal consumer financial law in 
supervisory and enforcement matters. On the other hand, consistent with 
the flexibilities announced in the April 3, 2020 joint statement, 
companies that are unable to adequately manage loss mitigation can 
expect the Bureau to take enforcement or supervisory action to address 
violations under its Regulation X, CFPA, or other authorities.\7\
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    \7\ See Bureau of Consumer Fin. Prot., Joint Statement on 
Supervisory and Enforcement Practices Regarding the Mortgage 
Servicing Rules in Response to the COVID-19 Emergency and the CARES 
Act, available at https://files.consumerfinance.gov/f/documents/cfpb_interagency-statement_mortgage-servicing-rules-covid-19.pdf.
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    In its oversight work, the Bureau plans to pay particular attention 
to:
    1. Whether servicers are providing clear and readily understandable 
information to borrowers about their options for payment assistance;
    2. Whether servicers are complying with the outreach requirements 
in Regulation X to ensure that borrowers are getting needed information 
about loss mitigation options, including:
     For borrowers who request further assistance, whether 
servicers are promptly resuming reasonable diligence in obtaining 
documents and information to complete loss mitigation applications; \7\
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    \7\ See Regulation X, 12 CFR 1024.41(c)(2)(iii); comments 
41(b)(1)-4.iii; 41(c)(2)(i)-1; 41(c)(2)(iii)-1 through -6.
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     For borrowers in forbearance, whether servicers are 
contacting borrowers before the end of the forbearance period to 
determine if the borrower wishes to complete the loss mitigation 
application and proceed with a full loss mitigation application; \8\
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    \8\ See Regulation X, comment 41(b)(1)-4.iii.
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    3. Whether servicers are complying with the Equal Credit 
Opportunity Act's (ECOA's) prohibition against discriminating against 
any applicant, with respect to any aspect of a credit transaction, 
including: \9\
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    \9\ 15 U.S.C. 1691(a). The ECOA prohibits discrimination based 
on race or color, religion, national origin, sex, marital status, 
age (provided the applicant has the capacity to contract), because 
all or part of the applicant's income derives from any public 
assistance program, and because the applicant has in good faith 
exercised any right under the Consumer Credit Protection Act 
(Consumer Credit Protection Act, 15 U.S.C. 1601 et seq.).
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     Whether servicers are managing communications with limited 
English proficiency borrowers while maintaining compliance with 
applicable laws; \10\
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    \10\ See Bureau of Consumer Financial Protection, ``Statement 
Regarding the Provision of Financial Products and Services to 
Consumers with Limited English Proficiency,'' 86 FR 6306 (Jan. 21, 
2021) (encouraging financial institutions to better serve LEP 
consumers in languages other than English and providing key 
considerations and guidelines financial institutions can use to 
develop related compliance solutions).
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     For applicants who are recipients of income derived from 
part-time employment, alimony, child support, separate maintenance 
payments, retirement benefits, or public assistance, whether servicers 
evaluate such income in accordance with the ECOA and Regulation B when 
determining eligibility for loss mitigation options, to the extent the 
servicer is otherwise required to use income in determining eligibility 
for loss mitigation options; \11\
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    \11\ For example, the ECOA and Regulation B prohibit creditors 
from automatically discounting or excluding from consideration the 
public assistance income of an applicant or the spouse of an 
applicant. See 15 U.S.C. 1691(b)(2), 12 CFR 1002.6(b)(5); 12 CFR 
part 1002, supp. I, ] 6(b)(5)-(3)(ii); see id. at 6(b)(5)-(1) (``A 
creditor must evaluate income derived from . . . public assistance 
on an individual basis . . . .''); see also Consumer Financial 
Protection Bureau, Supervisory Highlights, Summer 2020, https://files.consumerfinance.gov/f/documents/cfpb_supervisory-highlights_issue-22_2020-09.pdf.
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    4. Whether servicers promptly handle loss mitigation inquiries and 
avoid unreasonably long hold times on phone lines; for example, the 
Bureau plans to scrutinize servicer conduct where hold times are 
significantly longer than industry averages;
    5. Whether servicers maintain policies and procedures that are 
reasonably designed to achieve the continuity of contact objectives to 
ensure that delinquent borrowers receive accurate information about 
their loss mitigation options; \12\
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    \12\ See Regulation X, 12 CFR 1024.40; see also 12 CFR 
1024.38(b)(2)(i) (requiring policies and procedures reasonably 
designed to ensure that the servicer can provide accurate 
information regarding loss mitigation options available to a 
borrower from the owner or assignee of the borrower's mortgage 
loan); 12 CFR 1024.38(b)(2)(ii) (requiring policies and procedures 
reasonably designed to ensure that the servicer can identify with 
specificity all loss mitigation options for which borrowers may be 
eligible pursuant to any requirements established by an owner or 
assignee of the borrower's mortgage loan).
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    6. For borrowers who submit complete loss mitigation applications, 
whether servicers evaluate the applications consistent with the 
Regulation X requirements to promote timely and consistent evaluations; 
\13\
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    \13\ See Regulation X, 12 CFR 1024.41.
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    7. Whether servicers comply with foreclosure restrictions in 
Regulation X and other Federal or State foreclosure restrictions; \14\ 
and
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    \14\ See Regulation X, 12 CFR 1024.41(f) and (g).
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    8. Whether servicers are complying with the Fair Credit Reporting 
Act's requirements to report the credit obligation or account 
appropriately.\15\
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    \15\ CARES Act, Public Law 116-136, sec. 4021 (2020) (amending 
section 623(a)(1) of the FCRA).
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IV. Conclusion

    The Bureau issues this policy statement to highlight supervisory 
and enforcement priorities with respect to mortgage servicing and to 
confirm that

[[Page 17899]]

the Bureau will hold servicers accountable if they are unable to manage 
an expected increase in borrowers needing loss mitigation assistance.

V. Regulatory Requirements

    The Bulletin constitutes a general statement of policy exempt from 
the notice and comment rulemaking requirements of the Administrative 
Procedure Act (APA). It is intended to provide information regarding 
the Bureau's general plans to exercise its supervisory and enforcement 
discretion for institutions under its jurisdiction and does not impose 
any legal requirements on external parties, nor does it create or 
confer any substantive rights on external parties that could be 
enforceable in any administrative or civil proceeding. Because no 
notice of proposed rulemaking is required in issuing the Bulletin, the 
Regulatory Flexibility Act also does not require an initial or final 
regulatory flexibility analysis. The Bureau has also determined that 
the issuance of the Bulletin does not impose any new or revise any 
existing recordkeeping, reporting, or disclosure requirements on 
covered entities or members of the public that would be collections of 
information requiring approval by the Office of Management and Budget 
under the Paperwork Reduction Act.

    Dated: March 31, 2021.
David Uejio,
Acting Director, Bureau of Consumer Financial Protection.

[FR Doc. 2021-07098 Filed 4-6-21; 8:45 am]
BILLING CODE 4810-AM-P