The Consumer Financial Protection Bureau (CFPB) on Monday announced a new series of proposed rules for forward mortgage servicers, designed to assist the millions of homeowners that will be seeing relief measures related to the COVID-19 coronavirus pandemic expire in the coming months.
While seeking public comment on the implementation of some of these new rules, officials with the CFPB told RMD that the proposals are not specifically aimed at the reverse mortgage industry but that its Office of Older Americans continues to monitor the situations which apply specifically to senior homeowners.
The possibility of additional regulatory posturing from the Bureau still exists, as the Bureau maintains regulatory enforcement authority over the reverse mortgage industry at the national level.
Among the proposed rules, chief among them is the proposal to delay servicers from initiating any foreclosure actions until December 31, 2021.
“The CFPB is seeking public input on that date, as well as whether there are more limited ways to achieve the same purpose,” the Bureau said in its announcement. “For example, the CFPB is considering whether to permit earlier foreclosures if the servicer has taken certain steps to evaluate the borrower for loss mitigation or made efforts to contact an unresponsive borrower. This provision, like the rest of the proposal, would only apply to loans secured by a borrower’s principal residence.”
The newly-proposed rule would also allow mortgage servicers to offer other loan modification options to borrowers determined to have COVID-19-related hardships, based on the evaluation of an incomplete application.
“Normally, with certain exceptions, Regulation X requires servicers to review a borrower for all available options at once, which can mean borrowers have to submit more documents before a servicer can make a decision,” the CFPB said. “Allowing this flexibility could allow servicers to get borrowers into an affordable mortgage payment faster, with less paperwork for both the servicer and the borrower. This provision would only be available for modifications that do not increase a borrower’s monthly payment and that extend the loan’s term by no more than 40 years from the modification’s effective date.”
Finally, the Bureau is proposing updated temporary guidance on servicer communications to borrowers to keep them informed of any loss mitigation options available to them in as clear and concise a way as possible. There is added risk of a large number of forbearances ending all at the same time, which could create problems for those borrowers that sought such relief.
Reverse mortgage situation
While the new rules for servicers announced on Monday do not have specific applicability to reverse mortgages, RMD was able to learn a little more about the CFPB’s current regulatory posture as it pertains to the reverse mortgage industry from Diane Thompson, senior advisor to Acting CFPB Director Dave Uejio, in a Monday morning call with reporters.
“You’re quite right that [today’s guidance] is not focused on reverse mortgages, in part because the reverse mortgages do not make up the forbearances,” Thompson told RMD. “So, what we’ve seen with COVID is that the forbearances are for the forward mortgages. On reverse mortgages, there’s no requirement to make those monthly payments of principal and interest, as a general matter.”
The focus in this instance is instead on 2.7 million homeowners who are in forbearance as a result of COVID-19, and the additional 800,000 mortgage borrowers who are delinquent without being in forbearance. That being said, the CFPB is monitoring the reverse mortgage industry and its borrowers through its Office of Older Americans, Thompson said.
“Reverse mortgage problems are just a little bit different,” she told RMD. “We are absolutely, of course, always [keeping an eye on issues affecting] older Americans, as we have a whole office dedicated to that. We are continuing to do work there.”
When directly asked about any potential actions that can be taken to shield reverse mortgage borrowers from foreclosure, which is still possible if a homeowner lapses on tax, insurance or homeowner’s association payments, Thompson did not want to publicly indicate what steps the Bureau might take in that regard, she said.
“We wouldn’t, as a general matter, forecast what we’re going to be doing in rulemaking until we make a public announcement,” she said. “But, it’s fair to say that we are monitoring the market and evaluating where we can be helpful in intervening.”
In terms of recent actions that could affect the cohort of senior reverse mortgage borrowers, Thompson elaborated that the $10 billion Homeowners Assistance Fund which passed as a part of the American Rescue Plan Act signed into law by President Joe Biden is in the process of being dispersed, but it takes some time, she said.
“That money is coming soon,” Thompson explained. “But it will take a while to get deployed at the state level. And so, it’s really important to make sure that before people lose their homes, they have a chance to be evaluated for all options, including the use of the Housing Assistance Fund money.”
The CFPB under the administration of President Biden has been making a series of moves over the past few months to differentiate from the way the agency operated when led by Director Kathleen Kraninger under President Donald Trump.
Last week, the Bureau rolled back a series of COVID-19 protections for financial services companies, a move made to more closely align with the use of its authority as defined in its founding legislation. In total, seven policy statements were rescinded by order of Acting Director Uejio, which allowed temporary flexibilities to financial institutions during the COVID-19 coronavirus pandemic in the realms of consumer financial markets including mortgages, credit reporting, credit cards and prepaid cards.
The Bureau also announced last month that it has rescinded its January 24, 2020 policy statement regarding prohibition on abusive acts or practices, saying that the move is being made in order to “better protect consumers and the marketplace from abusive acts or practices, and to enforce the law as Congress wrote it.”
The CFPB made a newly-published consumer guide for reverse mortgages available on its website and in physical form for lenders and originators titled “You have a reverse mortgage: Know your rights and responsibilities,” which is designed to inform consumers about the obligations that come with having a reverse mortgage even without a monthly mortgage payment.
Uejio is serving as Acting Director while President Biden’s full-time nominee for the position, Federal Trade Commissioner Rohit Chopra, works through the Senate confirmation process. His confirmation may be delayed due to vacancies created at the Federal Trade Commission, according to analysts.