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CSBS asks Fed and Treasury to create liquidity facility to support mortgage servicers
On March 25, CSBS President and CEO John W. Ryan sent a letter to Federal Reserve Board Governor Jerome Powell and Treasury Secretary Steven Mnuchin encouraging the agencies to create a liquidity facility under Section 13(3) of the Federal Reserve Act to support mortgage servicers “in anticipation of widespread borrower payment forbearance.” According to the letter, CSBS members—state regulatory agencies responsible for regulating bank and nonbank financial companies—have expressed concerns regarding liquidity and solvency in the mortgage servicing sector, and are particularly focused on monitoring the financial condition of nonbank mortgage servicers. Without a liquidity facility, CSBS warned that “mortgage servicers will experience a severe liquidity shortage that may threaten their continued viability, and by extension, the health of the nation’s housing finance market.”
Fannie Mae issues multifamily investor communication regarding Covid-19
On March 20, Fannie Mae published responses to frequently asked questions related to the impact of Covid-19 on Multifamily MBS and CRT programs. Among other things, the responses clarified that for loans granted forbearance due to Covid-19, Fannie Mae “will continue to advance principal and interest payments on the MBS for at least 120 days and may choose to advance for up to two years before being required to buy the mortgage loan out of the MBS trust.” With respect to the CRT program, Fannie Mae reiterated its commitment to take proactive loss mitigation measures to reduce the likelihood and severity of any losses for any loan that indicates an increased risk of default.
VA issues foreclosure moratorium for Covid-19-affected borrowers
On March 18, the Department of Veterans Affairs (VA) released Circular-26-20-8, “Foreclosure Moratorium for Borrowers Affected by Covid-19,” to strongly encourage mortgage servicers to observe the following actions regarding home loan borrowers affected or potentially affected by Covid-19: (i) establish a 60-day moratorium starting March 18 on completing pending foreclosures or initiating new foreclosures; and (ii) consider the impact of eviction when choosing to retain property instead of conveying to the VA. The VA requests that loan holders not expose veterans and their families to additional risks through evictions, and states that VA regulation 38 C.F.R. 36.4324(a)(3)(ii) “allows additional interest on a guaranty claim when eventual termination has been delayed due to circumstances beyond the control of the holder, such as VA-requested forbearance.”
Federal student loan payments suspended, interest waived during Covid-19 national emergency
On March 20, U.S. Secretary of Education Betsy DeVos announced temporary relief for student loan borrowers in response to the Covid-19 national emergency. The borrower relief measures include:
- Automatic 0% interest rates on all federally held student loans for at least 60 days;
- Option to suspend payments for at least two months;
- Administrative forbearance on any federally held loan by all federal student loan servicers at the request of the borrower, for at least 60 days, beginning on March 13;
- Automatic payment suspension for any borrower who is “more than 31 days delinquent as of March 13, or who becomes more than 31 days delinquent”; and
- The entire loan “payment will be applied to the principal” loan amount “once all interest accrued prior to the president's March 13 announcement is paid” for all borrowers who wish to continue making payments on their loans.
Additional information may be found at StudentAid.gov/coronavirus.
AARMR urges waiving of certain fees and charges
On March 17, the American Association of Residential Mortgage Regulators (AARMR) issued a statement encouraging mortgage lenders and servicers to take steps to “mitigate the impact to consumers of actions taken in response to Covid-19.” For lenders, the AARMR suggests steps such as waiving rate lock extension fees if an application is delayed for reasons beyond an applicant’s control, or refraining from closing an application due to incompleteness if an applicant is having difficulty gathering required documents. For servicers, the AARMR suggested waiving certain late charges (if permitted), offering forbearance plans or other deferment options, and generally ensuring that all staff are aware of available options and are proactive in assisting borrowers with potential delinquent payments. The AARMR also encourages member agencies to consider the impact of Covid-19 in their dealings with brokers, lenders, servicers, and MLOs.
VA issues Covid-19 guidance
On March 16, the Department of Veterans Affairs (VA) released Circular 26-20-7, “Special Relief for those Potentially Impacted by COVID-19,” which provides guidance for veterans, lenders, servicers, and appraisers on the VA Home Loan Program in connection with the spread of Covid-19. Veterans are encouraged to call ahead for any in-person appointments with VA staff or with a lender, appraiser, or servicer regarding a home loan if the veteran may present a Covid-19 transmission risk. Additionally, the VA will permit lenders and servicers to offer relief to veterans impacted by the virus through (i) forbearance on guaranteed loan payments; (ii) waiver of late charges; and (iii) suspending credit bureau reporting. Appraisers are encouraged to continue business in accordance with Chapter 10 of the M26-7 Lender’s Handbook. As with the guidance for veterans, appraisers are also encouraged to determine if they present a Covid-19 transmission risk prior to face-to-face appointments, and then, as appropriate, to reschedule appointments or transfer the assignment to another appraiser. The announcement also urges appraisers to follow the Centers for Disease Control and Prevention’s recommendations to prevent the spread of Covid-19 when performing appraisals. The circular notes that the VA “is continuing with normal program operations” and will update information on the VA Home Loan Program as it is available.
GSEs provide Covid-19 guidance
FHFA and Freddie Mac have issued reminders that borrowers impacted by Covid-19 meet forbearance hardship requirements for Fannie Mae and Freddie Mac loans, and servicers must work with impacted borrowers unable to make mortgage payments and be responsive to potential requests for assistance.
Freddie Mac also reiterated a requirement for sellers/servicers to maintain a business continuity plan as set forth in Section 1302.3 of the Freddie Mac Guide.
Financial regulators provide supervisory relief, and VA encourages mortgage relief to veterans after Tennessee tornadoes
On March 12, the OCC, Federal Reserve Board, FDIC, NCUA, and the Tennessee Department of Financial Institutions issued an interagency statement on supervisory practices for financial institutions affected by the recent tornadoes in Tennessee. Among other things, the agencies called on financial institutions to “work constructively” with affected borrowers, noting that “prudent efforts” to adjust loan terms in affected areas “should not be subject to examiner criticism.” Institutions facing difficulties in complying with any publishing and reporting requirements should also contact their primary federal and/or state regulator. Additionally, the agencies noted that institutions may receive Community Reinvestment Act consideration for community development loans, investments, and services that revitalize or stabilize federally designated disaster areas. In FIL-16-2020, the FDIC further encouraged supervised institutions to consider, among other things, (i) extending repayment terms; (ii) restructuring existing loans; or (iii) easing terms for new loans to affected borrowers, if done in a manner consistent with sound banking practices. The FDIC stated it will also consider regulatory relief from certain filing and publishing requirements.
Separately, on March 10, the Department of Veterans Affairs (VA) issued Circular 26-20-5 to encourage mortgagees to provide relief for VA borrowers affected by the recent tornadoes in Tennessee. The Circular encourages loan holders and servicers to (i) extend forbearance to distressed borrowers and to members of the National Guard assisting in the recovery efforts; (ii) establish a 90-day moratorium on initiating new foreclosures; (iii) waive late charges; and (iv) suspend credit reporting on affected loans. The Circular will be rescinded April 1, 2021. Mortgage servicers and veteran borrowers are also encouraged to review the VA’s Guidance on Natural Disasters.
Find continuing InfoBytes coverage on disaster relief guidance here.
Mortgage sellers, servicers reminded of relief options for borrowers impacted by Covid-19
On March 10, Federal Housing Finance Agency Director Mark Calabria released a statement reminding mortgage servicers that borrowers impacted by Covid-19 and experiencing payment hardship would be eligible for hardship forbearance options set forth in the relevant Fannie Mae and Freddie Mac servicing guidelines. Calabria directed sellers and servicers to guidance issued the same day by Freddie Mac, which also reminds sellers and servicers that business continuity plans must be in place in order to conduct business operations in the event of an interruption. Fannie Mae has provided similar guidance to its seller/servicers.
Separately, on March 9, the Federal Housing Administration (FHA) issued a notice to all FHA-approved mortgagees and servicers reminding entities of loss mitigation program options that should be offered to distressed borrowers, including those impacted by Covid-19, to prevent foreclosures. These options, FHA noted, are available in the Single Family Housing Policy Handbook, 4000.1 Section III.A.2.
CFPB examines student loan borrowers enrolled in IDR plans
On November 22, the CFPB released a new Data Point report from the Office of Research titled “Borrower Experiences on Income-Driven Repayment,” which examines, among other things, the types of student loan borrowers who participate in income-driven repayment (IDR) plans, the evolution of borrower delinquencies, and borrower experiences with enrollment recertification processes. According to the Bureau, while student loans are currently the largest non-mortgage form of debt held by U.S. consumers, “there remains limited evidence of how this growing debt burden affects the use of other financial products and services.” Key findings of the report include:
- Delinquencies decreased 19 to 26 percent after one year into IDR enrollment for borrowers who received partial payment relief as compared to the quarter before enrollment, and the share of borrowers actively in repayment on their loans was 27 percent higher at the end of the first year of being enrolled in IDR than prior to entering IDR.
- Delinquent borrowers who enrolled in IDR showed a 17 percent reduction in their delinquencies on other credit products, however, the Bureau noted that “one in five such borrowers were still behind on their payments on these other credit products one year later, reflecting persistent financial struggles for some borrowers.”
- Roughly two-thirds of borrowers who recertified their IDR enrollment for a second year did so either immediately or within two months after the initial IDR period ended, with an additional 12 percent entering forbearance or deferment. The Bureau stated that borrowers who do not recertify on time after their first year may face persistent difficulties, and reported that delinquencies more than tripled for these borrowers.
- More than 80 percent of borrowers enrolled in IDR “sought out prolonged payment relief beyond a single year.”
According to the Bureau, the data “helps the Bureau and other researchers and policymakers understand how consumers repay their student loans and how that behavior affects their use of other financial products.”