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  • VA re-extends foreclosure and eviction moratorium for borrowers affected by Covid-19

    Federal Issues

    On December 28, the Department of Veterans Affairs issued Circular 26-20-40, which further extends foreclosure and eviction relief for borrowers affected by Covid-19 (previously covered here). Specifically, all properties secured by VA-guaranteed loans, including those previously secured by VA-guaranteed loans but currently in the VA’s REO (real estate owned) portfolio, are subject to a moratorium on foreclosure and eviction through February 28, 2021. With the exception of abandoned or vacant property, the moratorium applies to the initiation of foreclosures, the completion of foreclosures in process and evictions.

    Federal Issues Covid-19 Department of Veterans Affairs Military Lending Foreclosure Evictions Mortgages

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  • VA proposes partial claim payment program

    Federal Issues

    On December 9, the Department of Veterans Affairs (VA) published a proposed rule in the Federal Register, which would establish a temporary program to help veterans return to making normal loan payments on VA-guaranteed loans after exiting a Coronavirus Aid, Relief, and Economic Security Act (CARES Act) forbearance period, known as “the COVID–19 Veterans Assistance Partial Claim Payment program” (PCP). The proposal would allow the VA to assist a veteran exiting a CARES Act forbearance by purchasing the amount of the veteran’s CARES Act indebtedness needed to bring the loan current, known as a “partial claim payment.” In exchange for the VA’s partial claim payment, the veteran would have to agree to repay the VA the amount of the PCP.

    In order to qualify for the PCP, servicers must first evaluate the borrower for loss-mitigation options already available in the VA program. For a loan to qualify for a PCP, among other things, (i) the guaranteed loan must have been either current or less than 30 days past due on March 1, 2020; (ii) the borrower must have received a CARES Act forbearance and missed at least one scheduled monthly payment; and (iii) there remains at least one unpaid monthly payment that the veteran did not make while under a CARES Act forbearance. Moreover, the amount of the partial claim payment cannot exceed 15 percent of the unpaid principal balance of the guaranteed loan on the date the borrower entered into the CARES Act forbearance. The PCP would have an annual interest rate fixed at 1 percent, with an automatic 60-month deferment period while interest accrues, and a total term of 120 months.

    The proposal does not include an effective date, but the VA requests comments on how a final rule that is not effective for 30 or 60 days following publication might negatively impact veterans, servicers, and other stakeholders. Additionally, the VA asks whether there would be enough time for industry implementation of the partial claim payment program if the final rule is effective 7 days after publication.

    Comments on the proposal are due by January 8, 2021.

    Federal Issues Department of Veterans Affairs Mortgages Covid-19 Agency Rule-Making & Guidance CARES Act

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  • Senate Democrats question CFPB’s lack of restitution in VA ad settlements

    Federal Issues

    On October 1, sixteen Democratic Senators sent a letter to CFPB Director Kathy Kraninger, expressing concern over the Bureau’s failure to obtain restitution in eight recent settlements with mortgage lenders for allegedly mailing consumers advertisements for Department of Veterans Affairs (VA) mortgages that contained misleading statements or lacked required disclosures (covered by InfoBytes here). The letter states that while the Bureau collected approximately $2.8 million in civil penalties over the eight settlements, it did not require any company to pay restitution to harmed consumers. The letter argues that the failure to obtain restitution in these matters was a departure from the Bureau’s practice in previous cases where it obtained restitution for consumers who enrolled in a service connected to allegedly deceptive advertising. The letter notes that, if the Bureau was not able to determine a restitution amount based on the “millions of advertisements” that were sent, it had the authority to seek disgorgement as a remedy. The letter requests the Bureau elaborate on, among other things, its decision not to seek restitution for consumers in the cited actions and to provide information about the standard the Bureau uses to determine when to provide restitution.

    Federal Issues U.S. Senate Mortgages CFPB Department of Veterans Affairs UDAAP

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  • CFPB settles with eighth lender on misleading VA advertising

    Federal Issues

    On September 14, the CFPB announced a settlement with an eighth mortgage lender for mailing consumers advertisements for Department of Veterans Affairs (VA) mortgages that allegedly contained misleading statements or lacked required disclosures. According to the Bureau, the lender offers and provides VA guaranteed mortgage loans, and allegedly sent false, misleading, and inaccurate direct-mail advertisements to servicemembers and veterans in violation of the CFPA, the Mortgage Acts and Practices – Advertising Rule (MAP Rule), and Regulation Z. Among other things, the Bureau alleged the advertisements (i) failed to include required disclosures; (ii) stated credit terms that the lenders were not actually prepared to offer; (iii) made “misrepresentations about the existence, nature, or amount of cash available to the consumer in connection with the mortgage credit product”; (iv) gave the false impression the lenders were affiliated with the government; and (v) used the name of the consumer’s current lender in a misleading way.

    The settlement imposes a civil money penalty of $625,000 and bans the lender from future advertising misrepresentations similar to those identified by the Bureau. Additionally, the settlement requires the lender to use a compliance official to review mortgage advertisements for compliance with consumer protection laws.

    The latest enforcement action is part of the Bureau’s “sweep of investigations” related to deceptive VA-mortgage advertisements. Previously, the Bureau issued consent orders against seven other mortgage lenders for similar violations, covered by InfoBytes herehere and here.

    Federal Issues CFPB Mortgages Department of Veterans Affairs Mortgage Lenders CFPA UDAAP MAP Rule Regulation Z

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  • VA issues circular on loss mitigation options for CARES Act forbearance cases

    Federal Issues

    On September 14, the Department of Veterans Affairs issued Circular 26-20-33, which clarifies whether, due to the impact of Covid-19, servicers may offer deferment as a Covid-19 loss mitigation option. Deferment may be used if the veteran is able to resume making monthly payment as scheduled under the loan contract after the conclusion of the forbearance period. However, for the VA’s purposes, servicers do not need to, and should not, enter into a modification agreement that modifies the terms of the existing loan for the purpose of applying a deferment. To accommodate the deferment option, the VA has temporarily waived the usual requirement that the final installment on any loan not be in excess of two times the average of the preceding installments. This waiver applies only where the servicer offers a deferment as a Covid-19 loss mitigation option to a borrower who requested CARES Act forbearance, among other conditions in the circular. The circular is rescinded October 1, 2021.

    Federal Issues Covid-19 Department of Veterans Affairs Loss Mitigation CARES Act Forbearance

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  • VA encourages mortgage relief after Hurricane Laura

    Federal Issues

    On September 4, the Department of Veterans Affairs (VA) issued Circular 26-20-34 to encourage mortgagees to provide relief for VA borrowers affected by Hurricane Laura. 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 October 1, 2021. Mortgage servicers and veteran borrowers are also encouraged to review the VA’s Guidance on Natural Disasters.

    Federal Issues Disaster Relief Department of Veterans Affairs Mortgages

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  • CFPB settles with three more lenders on misleading VA advertising

    Federal Issues

    Recently, the CFPB announced settlements (see here, here, and here) with three mortgage lenders for mailing consumers advertisements for Department of Veterans Affairs (VA) mortgages that allegedly contained misleading statements or lacked required disclosures. According to the Bureau, the lenders offer and provide VA guaranteed mortgage loans, and allegedly sent false, misleading, and inaccurate direct-mail advertisements to service members and veterans in violation of the CFPA, the Mortgage Acts and Practices – Advertising Rule (MAP Rule), and Regulation Z. Among other things, the Bureau alleges the advertisements (i) failed to include required disclosures; (ii)  stated credit terms that the lenders were not actually prepared to offer; (iii) made “misrepresentations about the existence, nature, or amount of cash available to the consumer in connection with the mortgage credit product”; and (iv) gave the false impression the lenders were affiliated with the government. Two of the lenders also allegedly used the name of the consumer’s current lender in a misleading way, and misrepresented that consumers would receive specific escrow refund amounts if they refinanced their mortgages, even though the advertised amounts “were calculated using a methodology that had no bearing on the actual escrow refund amount,” and consumers were often required to fund new escrow accounts upon generating new loans.

    In addition, one of the lender’s advertisements represented to consumers that they could “‘[s]kip two payments’ or ‘miss’ two payments by refinancing with the company,” but failed to disclose, among other things, that the skipped or missed payments would be added to the loan’s principal balance.

    The consent orders (see here, here and here) impose bans on future advertising misrepresentations similar to those identified by the Bureau, require the lenders to use a compliance official to review mortgage advertisements for compliance with consumer protection laws, and require compliance with certain enhanced disclosure requirements. The Bureau further imposes civil penalties of $225,000, $50,000, and $230,000 respectively against the lenders.

    The latest enforcement actions are part of the Bureau’s “sweep of investigations” related to deceptive VA-mortgage advertisements. In August and July, the Bureau issued consent orders against four other mortgage lenders for similar violations, covered by InfoBytes here and here.

     

    Federal Issues CFPB Enforcement Mortgages Department of Veterans Affairs Mortgage Broker Mortgage Lenders CFPA UDAAP MAP Rule Regulation Z

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  • CFPB settles with two mortgage companies over misleading VA loan advertisements

    Federal Issues

    On August 26, the CFPB announced a settlement with a mortgage company to resolve allegations that the company, which is licensed as a mortgage broker or lender in approximately 11 states, sent false, misleading, and inaccurate direct-mail advertisements to servicemembers and veterans for its VA-guaranteed loans in violation of the CFPA, Mortgage Acts and Practices – Advertising Rule (MAP Rule), and Regulation Z. According to the Bureau, among other things, the mortgage company (i) advertised credit terms that the lenders were not actually prepared to offer; (ii) failed to clearly and conspicuously disclose payment terms; (iii) made numerous “misrepresentations about the existence, nature, or amount of cash available to the consumer in connection with the mortgage credit product”; and (iv) misrepresented the consumer’s repayment obligations by failing to state the amount of each payment that would apply over the term of the loan or failing to clearly and conspicuously state that actual payment obligations would be greater. In addition to a $260,000 civil money penalty, the consent order requires the company to enhance its compliance functions, designate a compliance official to review mortgage advertisements for compliance with consumer protection laws, and comply with certain enhanced disclosure requirements. Additionally, the company is prohibited from making similar misrepresentations in the future.

    Earlier on August 21, the CFPB also announced a settlement with a mortgage company to resolve allegations that the company sent false, misleading, and inaccurate direct-mail advertisements to servicemembers and veterans for its VA-guaranteed loans in violation of the CFPA, Mortgage Acts and Practices – Advertising Rule (MAP Rule), and Regulation Z. According to the Bureau, among other things, the mortgage company (i) advertised credit terms that the lenders were not actually prepared to offer; (ii) described variable-rate loans as “fixed,” when in fact the rates were adjustable; (iii) falsely stated or implied that consumers with “FICO scores as low as 500” would qualify for advertised rates; and (iv) gave the false impression the lenders were affiliated with the government. In addition to a $150,000 civil money penalty, the consent order prohibits the company from making similar misrepresentations and requires the company to designate a compliance official to review mortgage advertisements for compliance with consumer protection laws.

    The latest enforcement actions are part of the Bureau’s “sweep of investigations” related to deceptive VA-mortgage advertisements. In July, the Bureau issued consent orders with two other mortgage lenders for similar violations, covered by InfoBytes here.

    Federal Issues CFPB Mortgages Department of Veterans Affairs Mortgage Broker Mortgage Lenders CFPA UDAAP MAP Rule Regulation Z Enforcement

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  • VA extends foreclosure and eviction moratorium for borrowers affected by Covid-19

    Federal Issues

    On August 24, the Department of Veterans Affairs issued Circulars 26-20-30 and 26-20-29, which extend foreclosure and eviction relief for borrowers affected by Covid-19, respectively. Specifically, properties secured by VA-guaranteed loans are subject to a moratorium on foreclosure through December 31, 2020. The moratorium applies to the initiation of foreclosures and to the completion of foreclosures in process. The foreclosure circular is rescinded January 1, 2021. Similarly, properties secured by VA-guaranteed loans, including those loans currently in VA’s Real Estate Owned portfolio, are subject to a moratorium on evictions through December 31, 2020. The eviction moratorium circular is rescinded April 1, 2021.

    Federal Issues Covid-19 Department of Veterans Affairs Foreclosure Mortgages Evictions

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  • VA issues lender guidance on Covid-19

    Federal Issues

    On June 30, the Department of Veterans Affairs issued Circular 26-20-25 (and subsequently issued Circular 26-20-25, Change 1), which provides guidance on the impact of the CARES Act foreclosure protections on VA-guaranteed purchase and refinance transactions. The circular states that for purchase and cash-out refinance loans, the “VA will not consider a Veteran as an unsatisfactory credit risk, based solely upon the fact that the Veteran received some type of credit forbearance or experienced some type of deferred payment during the COVID-19 national emergency.” With regard to Interest Rate Reduction Refinance Loans (IRRRL), the Circular notes that the VA is waiving certain prior approval requirements for delinquent loans if (i) the lender is approved to close loans on an automatic basis; (ii) the loan being refinanced is under CARES Act forbearance protections; (iii) the borrower is no longer experiencing the financial hardship caused by the Covid-19 pandemic; and (iv) the borrower qualifies for other IRRRL credit standards. Moreover, the Circular details additional IRRRL considerations for lenders, including maximum loan amounts, loan seasoning, and valuation requirements. Lastly, the Circular encourages lenders to waive origination fees and consider discount points and premium pricing offsets for veterans impacted by the Covid-19 pandemic.

    Federal Issues Covid-19 CARES Act Department of Veterans Affairs Refinance IRRRL Foreclosure

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