In mid-May 2020, we reported that Fannie Mae and Freddie Mac’s (GSE) COVID-19 payment deferral programs were exposing mortgage managers to violating some of the Consumer Financial Protection Bureau’s mortgage management rules. (CFPB) in Regulation X. When initially introduced, GSE’s COVID-19 payment deferral programs appeared to require service providers to come up with a loss mitigation solution based on an incomplete loss mitigation claim in violation of the CFPB anti-avoidance clause. On June 23, 2020, following pressure from the industry, the CFPB published a provisional final ruleamending Regulation X in a way that removed many of the barriers that prevented mortgage services from offering GSE’s COVID-19 deferral payment in accordance with applicable law. Unfortunately, the interim final rule is simply not broad enough to protect mortgage officers from the legal risks associated with GSE’s non-COVID-19 payment deferral programs.

At March 25, 2020 – just before the introduction by the GSEs of the COVID-19 deferral program – the GSEs deployed their more general payment deferral programs and not related to COVID-19 (standard deferral). The program is very similar to the COVID-19 program and “is designed to provide relief to eligible borrowers who have the financial capacity to resume their monthly payments, but who are unable to pay the additional monthly contributions required by a loan plan. repayment. . ”A borrower eligible under the standard deferral plan will be discounted by deferring up to two months of overdue principal and interest, creating a renegotiated non-interest-bearing balance that will become due on the due date of the loan. mortgage, on the repayment date or on transfer or sale. To offer a standard deferral, a service agent usually needs to confirm, among other things, that the borrower has resolved their difficulties, is able to continue to perform the full monthly contract payment and is unable to reinstate the mortgage or afford a repayment plan. cure delinquency. Like the COVID-19 deferral program, GSEs note that standard deferral can be offered “without receive a complete borrower response package (PRB) ”.

At July 15, 2020, the GSEs announced a third type of payment deferral program – a program specific to borrowers who may have become delinquent due to a difficult situation related to a disaster (Disaster Deferral). Disaster deferral is functionally similar to the COVID related deferral program and standard deferral. All three programs are designed to bring an eligible borrower up to date by deferring certain missed payments at the end of the loan as an interest-free balance. As part of deferral in the event of a claim, a service provider can defer missed payments for up to 12 months. In order to offer a deferral in the event of a claim, a provider usually needs to establish quality contact with the borrower and confirm, among other things, that the borrower has resolved their difficulties, is able to continue to make the monthly contractual payment. complete and is unable to reinstate the mortgage or afford a repayment plan to remedy the delinquency. The ESGs note that “the duty officer should not require a complete Borrower Response Package (PRB) to assess the borrower for disaster payment.”

The Standard Deferral and Disaster Deferral programs raise a familiar question: Can service providers legally make these offerings as envisioned by GSEs without first collecting a full loss mitigation claim?

As a further reminder, the anti-avoidance clause of Regulation X generally prohibits mortgage agents from offering a loss mitigation option based on an assessment of an incomplete loss mitigation request, unless the offer result is not considered a short-term forbearance program or a short-term repayment. or falls under the CFPB’s provisional final rule of June 23 providing for an exception to the anti-avoidance clause for certain postponements related to COVID-19. For the purposes of the loss mitigation rules of Regulation X, a short-term forbearance is when a service agent allows a borrower to forgo up to six months of payments, regardless of how long the borrower has to make up for missing payments, and a short-term repayment plan is when a borrower is allowed to repay up to three months of overdue payments over a period not exceeding six months. Since the standard GSE deferral program contemplates deferring up to two months of overdue payments until the end of the loan term, and disaster deferral contemplates deferring up to 12 months of payments , the GSE programs do not quite fit into the CFPB’s short deadline. – term abstention or exceptions to the short-term repayment plan. And since the CFPB Interim Final Rule is only related to COVID-19 difficulties, the GSE Standard Deferral and Disaster Deferral Programs also do not fall under this exception. In summary, GSE’s non-COVID-19 deferral programs suffer from all of the regulatory compliance issues that existed with the GSE’s COVID-19 deferral program when it was first introduced and prior to the CFPB’s interim final rule.

There are three possible solutions to this problem: (1) the CFPB could still remove some of the restrictions in the anti-avoidance clause; (2) GSEs could change their non-COVID-19 deferral program guidelines; or (3) duty officers could view conversations with borrowers as full loss mitigation applications for regulatory X purposes. The latter option was discussed under COVID-19 deferral programs earlier this year, but is less than ideal for a number of reasons. Among other things, viewing a conversation as a complete application is likely to confuse the borrower, as an appraisal notice should be sent and likely should include the reasons for denial of the change and information on how to appeal those. refusal. It may also cause some borrowers to lose legal protections, and quite frankly, is just not an avenue fully contemplated by the GSE’s guidelines or model forms. Therefore, the best way to resolve this problem appears to be either further relief by the CFPB or changes to the GSE guidelines.

Loan service clerks Fannie Mae and Freddie Mac will be required to assess borrowers for the standard deferral effective January 1, 2021. Meanwhile, the disaster deferral took effect on October 1, 2020. The matter The question remains, however, how the agents will be able to offer these programs in accordance with federal law?

The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.