House hearing on mortgage servicers’ implementation of CARES Act
On July 16, the House Financial Services Committee’s Subcommittee on Oversight and Investigations held a hearing entitled “Protecting Homeowners During the Pandemic: Oversight of Mortgage Servicers’ Implementation of the CARES Act.” The subcommittee’s memorandum regarding the hearing discussed, among other things, the HUD Office of Inspector General’s report of its review of the type of forbearance information accessible to borrowers on the top 30 mortgage servicers’ websites. The report highlighted concerns that 10 of the servicers failed to have forbearance information “‘readily available’ on their websites,” 14 servicers’ websites did not provide information about the length of the forbearance period to which borrowers are entitled under the CARES Act, and certain servicers “included information giving the impression that lump sum payments were required at the end of the forbearance period.”
Witnesses discussed widespread issues in CARES Act-related mortgage servicing, with several witnesses and lawmakers highlighting how preexisting inequalities have especially imperiled black and Latinx home ownership during the Covid-19 pandemic. One witness suggested that servicers should be required to provide written notice to borrowers of their options and rights under the CARES Act and should be held accountable for failing to provide consistent, accurate forbearance information to borrowers in a timely manner. Another witness noted that housing counselors have reported servicers providing misinformation on payment and deferral options, and stressed the need for coordinated efforts between the CFPB, FHFA, and HUD, in addition to strong supervisory and enforcement activity.
Other topics discussed during the hearing included (i) the importance of providing clear guidance for borrowers, as well as the importance of loan modifications, loss mitigation options, and long term solutions once forbearance has ended; (ii) understanding what servicers of non-federally backed mortgages not covered by the CARES Act are doing to assist borrowers, and whether there should be a safe harbor for these mortgage servicers from investor liability; and (iii) the CFPB’s responsibility for overseeing servicers. One of the witnesses noted during the hearing, however, that many mortgage servicers offered homeowners forbearance options before the CARES Act, provided forbearance to homeowners with non-federally backed mortgages, and have responded to “an evolving series of program and regulatory announcements from various programs and agencies.”