CFPB Releases COVID-19 Mortgage Servicing Final Rule
On June 28 2021, the Consumer Financial Protection Bureau released its much-anticipated mortgage servicing final rule related to COVID-19. This rulemaking amends Regulation X and, as expected, largely tracks the proposal that the Bureau issued in early April 2021 and that we wrote about shortly thereafter. The new rules will become effective on August 31, 2021, leaving mortgage servicers a very short amount of time — 64 calendar days to be exact — to digest and implement the new requirements and prohibitions.
Like the April 2021 proposal, the Bureau’s final rule contains four main components:
Moratorium on new foreclosure actions through December 31, 2021;
Exception to the anti-evasion clause for certain COVID-19 modification options;
New early intervention communication requirements; and
Clarification on the reasonable diligence standard for borrowers in forbearance.
In general, the aspects of the Bureau’s proposed rule that seemed to garner the most attention and comments from mortgage servicers and trade associations were the foreclosure moratorium and the early intervention contact requirements. Thankfully, the Bureau did react to some of the industry’s concerns. For example, rather than institute a blanket prohibition on new foreclosure actions, the Bureau adopted certain limited exceptions to the general rule, including for nonresponsive borrowers, borrowers who have gone through a complete loss mitigation evaluation, and abandoned properties. As compared to the proposed rule, important changes were also made to the anti-evasion clause exception that will apply to certain loan modifications. Similarly, the Bureau modified the early intervention requirements in response to concerns surrounding the timing for borrowers in forbearance. Rather than tie certain requirements to the “last live contact,” the Bureau reacted to industry feedback that the language was problematic and refined the law so that the contact generally must be made between 10-45 days before the end of most forbearance plans.