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Washington Department of Financial Institutions amends guidance for state regulated and exempt residential mortgage loan servicers
On June 19, the Washington Department of Financial Institutions issued amended guidance that replaces guidance issued in March to Washington State regulated and exempt residential mortgage loan servicers regarding support for consumers impacted by Covid-19. The amended guidance urges mortgage servicers to continue to assist consumers adversely impacted by Covid-19. The department further urges services to take “reasonable and prudent actions through September 30, 2020, subject to the requirements of any related guarantees or insurance policies” to support mortgagors by: (1) forbearing mortgage payments; (2) refraining from certain credit reporting; (3) offering additional time to complete trial loan modifications; (4) ensuring that late payments do not adversely affect a consumer’s ability to obtain permanent loan modifications; (5) waiving certain fees; (6) postponing foreclosures; (7) ensuring mortgagors do not experience service disruptions as a result of office closures; and (8) proactively reaching out to mortgagors to explain the assistance being offered.
FHFA adds new translated Covid-19 resources on LEP site
On June 16, FHFA added new translated versions of its Covid-19 resources to its Mortgage Translations website. The website now includes English, Spanish, traditional Chinese, Vietnamese, Korean, and Tagalog translations of scripts that servicers may use when discussing Covid-19 forbearance with borrowers. The revised Mortgage Assistance Application also is available in the same six languages.
New York enacts legislation on residential mortgage payment forbearance
On June 17, New York Senate Bill 8243, which relates to the forbearance of residential mortgage payments, was signed into law. Specifically, SB 8243 requires New York regulated institutions to: (1) make applications for forbearance of any payment due on a residential mortgage on property located in New York “widely available to any qualified mortgagor who, during the covered period, is in arrears or on a trial period plan, or who has applied for loss mitigation and demonstrates financial hardship during the covered period;” and (2) grant such forbearance for a period of 180 days to any such qualified mortgagor with an option to extend an additional 180 days. Such forbearances may be backdated to March 7, 2020. SB 8243 also sets forth certain requirements for the mortgage forbearances granted under the law, which includes limitations on credit reporting and charging interest and late fees. The law also provides that adhering to SB 8243 will be a condition precedent to commencing a foreclosure action resulting from a missed payment, which would have otherwise been subject to the law. However, SB 8243 does not apply to, or affect mortgage loans made, insured, or secured by a United States agency or instrumentality, a government sponsored enterprise, or a federal home loan, or the rights and obligations of any lender, issuer, servicer or trustee of such obligations, including servicers for the Government National Mortgage Association.
On the same day, New York Senate Bill 8428, which also relates to the forbearance of residential mortgage loans, was signed into the law. The requirements in SB 8428 are similar to the requirements set forth in SB 8243, except that SB 8428 clarify certain areas of the law including the types of properties subject to the Law, who may receive a forbearance, and when a forbearance extension is warranted. SB 8428 also clarifies that the obligation to grant the forbearance relief required is subject to the regulated institution having sufficient capital and liquidity to meet its obligations and to operate in a safe and sound manner. To the extent a regulated institution determines it is unable to offer relief, it must alert the Department of Financial Institutions within five days of making such a determination.
FHFA’s Calabria discusses housing market with Senate Committee
On June 9, Federal Housing Finance Agency (FHFA) Director Mark Calabria testified before the Senate Committee on Banking, Housing, and Urban Affairs on the state of the housing market due to the Covid-19 pandemic. In his published statement, Calabria noted that at the start of 2020, the housing market was in a “strong position,” but “in response to Covid-19, financial markets endured a severe dislocation in March.” According to the statement, home prices have remained supported, as drops in demand have been balanced by a decrease in inventory. The statement also provides an update on FHFA’s policy responses to the Covid-19 pandemic. With regard to forbearances, Calabria acknowledged that forbearance rates were predicted to reach 25-50 percent; however, internal data indicates that “[e]nterprise forbearance rates remain manageable.” Specifically, the 30-60 day combined delinquency rate for borrowers with loans in Enterprise mortgage-backed securities “remains below the estimated rate of forbearance,” with Calabria commenting that some borrowers “who have requested forbearance are nonetheless continuing to make payments on their loan.” At the hearing, in response to a question asking if the FHFA plans to extend the foreclosure moratorium past June 30, Calabria noted that the agency is considering extending it “a month at a maximum” and would be “making that announcement certainly within a week.”
Calabria also discussed FHFA’s re-proposed capital rule for the Enterprises (covered by InfoBytes here). His statement notes that “Fannie and Freddie lack the capital to withstand a serious downturn in the housing market,” and the re-proposed rule would “help each [E]nterprise become safe and sound to fulfill its statutory mission across the economic cycle.”
HUD will allow mortgages to be endorsed despite forbearance
On June 4, HUD announced new, temporary guidance (see FHA Info #20-36 and HUD Mortgagee Letter 2020-16), which, among other things, grants mortgagees the ability to submit a mortgage for insurance endorsement involving a borrower who is experiencing financial hardships due to the Covid-19 pandemic, provided the mortgagee “executes a two-year partial indemnification agreement.” The temporary guidance sets the initial amount of partial indemnification at 20 percent of the original loan amount, which will only become payable if the mortgage goes into foreclosure and results in a claim to the FHA Mutual Mortgage Insurance Fund. Mortgagees may access the new agreement and instructions for endorsing these loans here. The guidance also provides for a temporary certification amendment to HUD 92900-A, which allows mortgagees to submit a separate addendum to a mortgagee’s certification addressing a mortgagee’s knowledge of changes in a borrower’s employment status and ability to make payments as a result of Covid-19 after the closing of a mortgage. HUD will also “continue to monitor the impacts to the market as well as implications to the Mutual Mortgage Insurance Fund and may adjust the level of partial indemnification for future indemnification contracts accordingly.”
CFPB, CSBS issue CARES Act forbearance guidance
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.
North Carolina Attorney General announces joint relief effort for North Carolinians facing Covid-19 financial hardship
On June 4, the North Carolina attorney general announced the Carolina Relief Plan, a voluntary agreement whereby participating financial institutions will offer certain financial relief to customers facing Covid-19 financial hardships. Relief includes, among other things, allowing eligible customers to request a forbearance on residential mortgage payments not otherwise covered by the CARES Act, assistance for payment extensions of auto loan accounts, and relief from monthly maintenance fees, overdraft fees, and CD early withdrawal penalties. Under the agreement, any participating financial institution also must: (1) offer to place a moratorium on residential mortgage foreclosures and consumer auto repossessions through at least June 30, 2020; (2) refrain from reporting loans subject to Covid-19 accommodations; and (3) inform customers about the assistance they are being offered and of the heightened risk of scams. One financial institution has signed onto the relief plan as of the time of the announcement.
VA clarifies property inspection requirements for CARES forbearance cases
On June 4, the Department of Veterans Affairs issued Circular 26-20-21 to clarify inspection requirements for properties purchased with loans guaranteed by the VA, where the borrower has been negatively impacted by Covid-19. The VA temporarily suspended its requirement to conduct a property inspection before the 60th day of delinquency for borrowers whose loans are currently in forbearance and were current or had not reached the 60th day of delinquency when the borrower requested CARES Act forbearance. The circular sunsets on July 1, 2021.
Fannie updates Covid-19 payment deferral lender letters
On May 27, Fannie Mae issued technical updates to Lender Letter LL-2020-07 and LL-2020-05 to include operational requirements related to reporting and completing a Covid-19 payment deferral, as well as the process for obtaining reimbursement for expenses related to the Covid-19 payment deferral. Among other things, servicers are required to pay any expenses associated with the execution of a Covid-19 payment deferral, such as required notary fees, recording costs, and title costs, but Fannie Mae will reimburse allowable expenses in accordance with F-1-05: Expense Reimbursement, in the Fannie Mae Servicing Guide.
As previously covered by InfoBytes, Fannie Mae and Freddie Mac announced the new Covid-19 payment deferral option to “help borrowers impacted by a hardship related to Covid-19 return their mortgage to a current status after up to 12 months of missed payments.” The new option is for borrowers who (i) are on a Covid-19 related forbearance plan, or (ii) have a resolved financial hardship due to Covid-19. If a borrower is eligible for the Covid-19 payment deferral, the servicer must allow the borrower to resume their contractual monthly payments; however, the delinquency amount must be deferred as a non-interest bearing balance, due and payable at liquidation, refinance, or maturity.
Servicers must begin evaluating borrowers for the Covid-19 payment deferral beginning July 1.
Fannie launches Covid-19 resource online portal
On May 26, Fannie Mae announced a new online resource for homeowners and renters titled, “Here to Help,” which compiles tools and resources to assist consumers with financial hardships due to the Covid-19 pandemic. The online portal features videos, fact sheets, and mortgage loan look-up tools for consumers and also provides lenders and servicers with tools to better assist their customers, including explanations of loss mitigation offerings and training videos for loan servicers.