MReport May 2021

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TH E M R EP O RT | 55 O R I G I NAT I O N S E R V I C I N G DATA G O V E R N M E N T S E C O N DA R Y M A R K E T THE LATEST GOVERNMENT CFPB: Lenders Must Prepare to Assist Struggling Borrowers The consumer-protection organization says it will closely monitor how servicers engage with clients, especially observing how effectively they process applications for loss mitigation. T he Consumer Finan- cial Protection Bureau (CFPB) has issued a warning to servicers to prepare for an onslaught of dis- tressed homeowners come sum- mertime, or as moratoria expire. This is the second CFPB notice indicating the bureau is aggres- sively readying to wind down COVID-19-related temporary pro- visions and flexibilities. One day prior to the issuance, the CFPB rescinded pandemic-prompted flexibilities for financial institu- tions regarding regulatory filings or compliance with consumer financial laws and regulations. It is a "known unknown" industry specialists have been an- ticipating for some time now, that the current high rate of forbear- ance plans could prove problem- atic down the road. The CFPB is warning servicers "to take all necessary steps now to prevent a wave of avoid- able foreclosures" in the coming months. Millions of homeowners in forbearance plans today will need help from their servicers when the pandemic-related federal emer- gency mortgage protections expire this summer and fall. The CFPB says servicers should dedicate sufficient resources and staff now to ensure they are prepared for a surge in borrowers needing help. The CFPB says it will closely monitor how servicers engage with borrowers, respond to bor- rower requests, and process ap- plications for loss mitigation. The CFPB will consider a servicer's overall effectiveness in helping consumers when using its discre- tion to address compliance issues that arise. "There is a tidal wave of distressed homeowners who will need help from their mortgage servicers in the coming months. Responsible servicers should be preparing now. There is no time to waste, and no excuse for inaction. No one should be surprised by what is coming," CFPB Acting Director Dave Uejio said. "Our first priority is ensuring struggling families get the assistance they need. Servicers who put struggling families first have nothing to fear from our oversight, but we will hold ac- countable those who cause harm to homeowners and families." Here are the CFPB's instruc- tions for servicers: • Be proactive. Servicers should contact borrowers in forbear- ance before the end of the forbearance period so they have time to apply for help. • Work 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. • Address language access. The CFPB will look care- fully at how servicers manage communications with borrowers with limited English proficiency and maintain compliance with the Equal Credit Opportunity Act and other laws. • Evaluate income fairly. Where servicers use income in deter- mining eligibility for loss mitiga- tion options, servicers should evaluate borrowers' income from public assistance, child-support, alimony, or other sources in ac- cordance with the Equal Credit Opportunity Act's anti-discrimi- nation protections. • Handle inquiries promptly. The CFPB will closely examine ser- vicer conduct where hold times are longer than industry averages. • Prevent avoidable foreclosures. The CFPB will expect servicers to comply with foreclosure restrictions in Regulation X and other federal and state restric- tions in order to ensure that all homeowners have an opportu- nity to save their homes before foreclosure is initiated.

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