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Financial Services Law Insights and Observations

CFPB approves mortgage servicing and small-dollar lending NAL templates

Federal Issues Covid-19 Small Dollar Lending CFPB Mortgages Fannie Mae No Action Letter Installment Loans

Federal Issues

On May 22, the CFPB announced it issued two no-action letter (NAL) templates. The two templates approved by the Bureau are intended to support financial institutions to better assist struggling consumers during the Covid-19 pandemic. Details of the two approved templates include:

  • Mortgage servicing. The Bureau approved a template submitted by a mortgage software company that would enable mortgage servicers to use the company’s online platform—which is an online version of Fannie Mae Form 710—to implement loss mitigation practices for borrowers. A copy of the company’s application is available here.
  • Small-dollar lending. The Bureau approved a template, in response to a request by a nonpartisan public policy, research and advocacy group for banks, that would assist depository institutions in offering a standardized, small-dollar credit product under $2,500 with a repayment term between 45 days and one year. The template covers, among other things, a product structured as either (i) a fixed-term, installment loan, which the customer would pay back in fixed minimum payment amounts over the term of the loan; or (ii) an open-end line of credit, linked to the consumer’s deposit account, where any amounts drawn would be repaid by consumers in fixed minimum amounts over a fixed repayment period. An institution would need to certify that their product offering meets the product features—labeled as “guardrails” in the template—but the Bureau notes that the inclusion of “any particular guardrail should not be interpreted as a statement by the Bureau that small-dollar credit products must contain such guardrails to avoid violating the law.” A copy of the group’s application is available here.
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