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Supreme Court postpones April arguments
On April 3, the U.S. Supreme Court announced that oral arguments scheduled for the April session will be postponed in light of the Covid-19 pandemic. According to the announcement, the Court may, depending on public health conditions, reschedule some of the March and April session cases to a later date prior to the end of the term. In addition, the Court will continue to post opinions on the Court’s website and will “proceed with the resolution of all cases argued this term.”
CFPB releases video to explain mortgage forbearance
On April 3, the CFPB announced the release of a video, which seeks to explain mortgage forbearance provided pursuant to the CARES Act. The announcement provides links to additional resources for consumers experiencing financial hardship due to the Covid-19 pandemic. In addition to the video, the resources include (i) mortgage relief, covered by InfoBytes here; (ii) student loans, covered by InfoBytes here; (iii) warning about scams; and (iv) “[o]nline and mobile banking tips for beginners.” Also on April 3, the Bureau updated guidance entitled Protect yourself financially from the impact of the coronavirus.
California Department of Business Oversight issues guidance to finance lenders, PACE administrators, deferred deposit originators, and premium finance companies
On April 3, the California Department of Business Oversight (DBO) issued guidance to finance lenders, Property Assessed Clean Energy (PACE) administrators, deferred deposit originators, and premium finance companies requesting such licensees work with their customers by offering payment plans and extensions at no additional cost to the customer. The DBO also requests that premium finance companies grant a grace period similar to the grace periods being granted by many insurance companies in order to prevent insureds from experiencing an interruption in insurance coverage.
FTC and FCC warn VoIP service providers about illegal Covid-19 robocalls
On April 3, the FTC and the FCC sent letters to three Voice over Internet Protocol (VoIP) service providers, warning the companies to stop sending spam robocall campaigns promoting Covid-19 related scams. According to the agencies, “routing and transmitting illegal robocalls, including Coronavirus-related scam calls, is illegal and may lead to federal law enforcement.” The agencies sent a separate letter to a telecommunications trade association thanking the group for its assistance in identifying the campaigns and relaying a warning that the FCC will authorize U.S. providers to begin blocking calls from the three companies if they do not comply with the agencies’ request within 48 hours after the release of the letter.
Fed changes supplementary leverage ratio rule to increase credit flow
On April 1, the Federal Reserve (Fed) released an interim final rule, which provides a short-term change to the calculation of the supplementary leverage ratio for holding companies (banks). This change temporarily allows banks to exclude their Treasury securities and Federal Reserve Bank deposits from the computation of the banks’ total assets, thus reducing the amount of capital the banks must maintain. The Fed suggested that the move will reduce the banks’ tier 1 capital requirements by around two percent, allowing them to take on more debt, resulting in an increase in available credit to households and businesses. The Fed stressed that it made this change to allow the banks to increase the flow of credit, and not to increase the banks’ capital distributions. The temporary change is effective immediately and will automatically revert on March 31, 2021. Comments on the rule must be submitted within 45 days of the announcement.
HUD issues mortgage relief for FHA single-family homeowners
On April 1, HUD issued guidance detailing mortgage relief options for single-family homeowners with FHA mortgages impacted by Covid-19. HUD explains that the CARES Act requires mortgage servicers to provide mortgage relief to borrowers with options for payment deferral or payment forbearance “for up to six months, and must provide an additional six months of forbearance if requested by the borrower.” In addition, Mortgagee Letter 2020-06 states that borrowers with forbearance plans will have all late charges, fees, and penalties waived as long as the plans are in effect. Although servicers are required to comply with the FCRA, the Mortgagee Letter instructs servicers not to report a borrower as delinquent if the borrower is in a Covid-19 forbearance plan and “performing as agreed,” and further suggests that servicers should “consider the impacts” of Covid-19 “on Borrowers’ financial situations and any flexibilities a Servicer may have under the FCRA.” The Mortgagee Letter also provides a mortgage relief option for “seniors with Home Equity Conversion Mortgages” who can request an extension of up to six months initially, which may be extended up to an additional six months. This mortgage relief option also requires that all late fees, charges, and penalties be waived during the extension period. Borrowers with owner-occupied properties who are granted forbearance plans must also be evaluated for a “C[ovid]-19 National Emergency Standalone Partial Claim” prior to the end of the plan. This option will allow borrowers to reinstate their loans after the plan ends.
VA, FHA issue valuation and appraisal guidance
On March 27, the Department of Veterans Affairs (VA) issued guidance on valuation and appraisal practices during the Covid-19 crisis. Effective on March 27 and until modified or rescinded, VA home loan appraisers may utilize exterior-only appraisals and, in certain limited situations, desktop appraisals, for purchase and refinance transactions. When the appraiser does not inspect the interior of the property, additional sources may be used to inform the appraisal, including public records, MLS listing information, and other reliable third-party sources. The VA also issued Exhibit A to the valuation and appraisal practices circular. This document provides a statement of assumptions and limiting conditions and certifications for Desktop-only appraisals, in addition to instructions and a scope of work to be used by the appraiser.
On the same day, the FHA issued similar guidance in Mortgagee Letter 2020-05 regarding appraisals and employment reverifications. Modifications to FHA single-family employment reverifications requirements include allowing verbal employment reverifications. The modifications also remove employment reverification requirements in certain situations, such as when certain criteria are met in forward purchase transactions, including, among other things: (i) where the mortgagee is not aware of loss of employment by the borrower; (ii) the mortgagee has year-to-date paystubs or electronic income verification for the borrower; (iii) the mortgagee has the borrower’s bank statement from immediately prior to the note date showing a direct deposit from an employer; and (iv) the mortgagee has evidence that the borrower has the equivalent of at least two months of the new payment amount, inclusive of principal, interest, taxes, and insurance. Modifications to appraisal protocols allow for exterior or desktop-only appraisals, and appraisers may utilize additional reliable information. Also, the FHA will require appraisals to include a signed certification that no interior appraisal was performed. FHA model certification forms can be found here and here.
CFPB states commitment to protecting consumers through continued examination and supervisory work
On April 1, the CFPB published a statement which assured that the Bureau will continue to perform examinations and other supervisory work during the Covid-19 pandemic, reinforcing the Bureau’s mission to protect consumers. The statement explains that the Bureau is taking advantage of technology to fulfill its examination duties and to stay in communication with supervised entities. Additionally, the statement suggests that the Bureau will consider individual circumstances and good faith efforts to comply when performing examination and supervisory work.
CFPB plans credit reporting supervisory flexibility during Covid-19 pandemic, contingent on accurate reporting
On April 1, the CFPB issued a policy statement directed at consumer reporting agencies (CRAs) and furnishers. Taking into consideration the Covid-19 pandemic, the statement explains that the Bureau will take a “flexible supervisory and enforcement approach during this pandemic regarding compliance with the Fair Credit Reporting Act [(FCRA)] and Regulation V.” The Bureau states that it will be flexible with CRAs and furnishers by refraining from taking enforcement actions and citing during exams in certain situations. Two examples of when the Bureau will be flexible include: (i) furnishers that continue to furnish accurate data to CRAs, including regarding payment relief arrangements (the Bureau notes that the CARES Act obliges furnishers to report consumer accounts as current when furnishers grant payment accommodations requested by consumers impacted by Covid-19); and (ii) CRAs and furnishers that make good faith efforts to investigate consumer disputes but take longer than the FCRA-prescribed 30 days. The statement notes that “the continued operation of the consumer reporting system…will enable consumers, as well as lenders, insurers, employers and other consumer report users, to maintain confidence in the consumer reporting system.”
Financial institution regulators provide Covid-19 mortgage servicer guidance
On April 3, the Federal Reserve (Fed), CSBS, CFPB, FDIC, NCUA, and the OCC (agencies) jointly announced an interagency statement (Joint Statement) to clarify the agencies’ supervisory and enforcement approach “regarding certain consumer communications required by the mortgage servicing rules” under Regulation X during the Covid-19 pandemic. Along with the Joint Statement, the CFPB released FAQs on the mortgage servicing rules during the pandemic. The agencies advised mortgage servicers to consider both the Joint Statement and the FAQs “when developing approaches to work with borrowers.”
The Joint Statement, among other things, gives mortgage servicers greater flexibility to provide CARES Act forbearance of up to 180 days and other short-term options upon the request of borrowers with federally backed mortgages without having to adhere to otherwise applicable compliance rules. In addition, the Joint Statement provides that no supervisory or enforcement action will be taken for delays in: (i) “sending the written early intervention notice to delinquent borrowers”; (ii) “establishing or making good faith efforts to establish live contact with delinquent borrowers”; or (iii) “sending the loss mitigation-related notices.”