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Financial Services Law Insights and Observations

CFPB, CSBS issue CARES Act forbearance guidance

Federal Issues CFPB CSBS CARES Act Mortgages Forbearance Consumer Finance Covid-19

Federal Issues

On June 4, the CFPB and the Conference of State Bank Supervisors (CSBS) issued joint guidance to assist mortgage servicers in complying with the CARES Act provisions granting a right to forbearance to consumers impacted by the Covid-19 pandemic. In addition to providing a statutory overview of the CARES Act protections related to forbearance and additional resources on how the CARES Act impacts other rules and regulations, the guidance contains specific FAQs based on observed or anticipated actions of mortgage servicers related to forbearance. Specifically, the FAQs address the following:

  • Servicers are able to grant CARES Act forbearance periods for less than 180-days at a borrower’s request or if the borrower has provided consent. In situations where a borrower and a servicer cannot agree on the length of the forbearance, or where a servicer cannot communicate with the requesting borrower under certain circumstances, servicers are required to default to the term requested by the borrower, which cannot exceed 180 days.
  • Servicers may not request information from borrowers supporting the need for forbearance. Borrowers do not need to prove hardship—an attestation of hardship due to Covid-19 is the only requirement established by the CARES Act for forbearance. Servicers must also grant forbearance to any requesting borrower with a federally-backed mortgage regardless of delinquency status.
  • Servicers, depending on the facts and circumstances, may be at risk of legal violation or causing consumer harm if they offer “limited repayment options when others are reasonably available.”
  • Examiners will evaluate originators’ communications with borrowers for legal compliance or to determine if consumer harm has occurred. Originators that mislead borrowers by using “loan closing attestations, notices or other communications to discourage borrowers from seeking forbearance” may be at risk of legal violation or causing consumer harm.
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