On April 1, 2021, the acting director of the Consumer Financial Protection Bureau (CFPB), David Uejio, shot a shot over the bow of mortgage service providers in the form of a compliance bulletin and a policy guidance (bulletin). A copy of the bulletin can be found here.
As is well known in the mortgage industry, there are currently millions of borrowers in default on their mortgage obligations. This could lead to a spate of foreclosures if the forbearance periods end later this year.
The bulletin no doubt warns that the CFPB will be keeping an eye on how mortgage service providers respond to requests from borrowers for mitigation assistance and how they process mitigation requests. Among other things, the CFPB will take into account the general effectiveness of a service provider in reducing avoidable foreclosures (along with other relevant factors) by proceeding at its own discretion against violations of the Federal Consumer Financing Act on supervisory and enforcement issues.
In other words, the CFPB expects mortgage service providers to take all necessary steps to prevent a wave of avoidable foreclosures. Unpreparedness is not accepted.
The CFPB also issued a press release along with the bulletin stating (among other things) that the CFPB will pay particular attention to how mortgage service providers:
- Be proactive. Servicers should reach out to borrowers forbearance before the grace period expires to give them time to seek help.
- Working with Borrowers. Servicers should work to ensure that borrowers have all the necessary information and help borrowers obtain documents and other information necessary to evaluate borrowers for assistance.
- Addressing the voice access. The CFPB will carefully examine how servicers manage communications with borrowers with limited English proficiency and ensure compliance with the Equal Credit Opportunity Act and other laws.
- Evaluate income fairly. When service providers use the income to determine eligibility for harm reduction, the service providers should assess borrowers’ income from public support, alimony, alimony or other sources in accordance with the Anti-Discrimination Protection Act of the Equal Credit Opportunity Act.
- Process inquiries immediately. The CFPB will closely examine the behavior of servicers when hold times are longer than the industry average.
- Avoiding avoidable foreclosures. The CFPB expects service workers to comply with foreclosure restrictions in Regulation X and other state and state restrictions to ensure all homeowners have an opportunity to rescue their homes before foreclosure is initiated.
Accordingly, now is the time for mortgage service providers to consider evaluating mortgage services, including applicable policies, procedures, controls, personnel and other resources, if they want to avoid ripping the CFPB on regulatory and enforcement issues.
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