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On May 7, FHA issued a notice clarifying when it is appropriate to begin reviewing borrowers for loss mitigation options outlined in the “Review of Borrowers in a Pandemic-Related Forbearance for a Covid-19 Loss Mitigation Option.” The notice acknowledges that some mortgagees are unsure about when to start reviewing borrowers for Covid-19 loss mitigation options. The notice points out that FHA requires mortgagees to review borrowers for Covid-19 loss mitigation options “upon the completion or expiration of the borrower forbearance period.” For clarifying purposes, however, the notice highlights that mortgagees may review borrowers for Covid-19 loss mitigation options “at any point prior to the completion or expiration of their COVID-19 or other pandemic-related forbearance period.” Not only is it permissible for a mortgagee to undertake a loss mitigation review before the borrower exits forbearance, FHA actually urges mortgagees to review borrowers for available Covid-19 loss mitigation options “as soon as practicable as these options are designed to help borrowers resolve their delinquencies and avoid foreclosure.”
On May 5, the U.S. District Court for the District of Columbia vacated the CDC’s eviction moratorium issued in response to the Covid-19 pandemic, ruling that the agency exceeded its authority with the temporary ban. The nationwide eviction ban was recently extended until June 30. Other courts have ruled on the lawfulness of the eviction moratorium but have limited the scope of their decisions to apply only to the particular parties involved in those lawsuits (see, e.g. InfoBytes coverage here). However, in vacating the eviction moratorium, the court rejected the federal government’s request that the decision be narrowed. “The Department urges the Court to limit any vacatur order to the plaintiffs with standing before this Court,” the court wrote. However the court found that “[t]his position is ‘at odds with settled precedent’” and that “when ‘regulations are unlawful, the ordinary result is that the rules are vacated—not that their application to the individual petitioner is proscribed.’” The court further emphasized that “[i]t is the role of the political branches, and not the courts, to assess the merits of policy measures designed to combat the spread of disease, even during a global pandemic.” Specifically, the court noted that the “question for the Court is a narrow one: Does the Public Health Service Act grant the CDC the legal authority to impose a nationwide eviction moratorium? It does not. Because the plain language of the Public Health Service Act . . . unambiguously forecloses the nationwide eviction moratorium, the Court must set aside the CDC order.”
Following the ruling, the DOJ issued a statement announcing its intention to appeal the court’s decision, citing that the court’s order “conflicts with the text of the statute, Congress’s ratification of the moratorium, and the rulings of other courts.”
On May 4, the Vermont legislature passed SB 88 (now known as Act 25), which among other things, permits mortgage loan activity to be conducted outside of an entity’s main place of business or branches. Act 25 allows a mortgage originator, broker, or servicer’s employees to work from their residence, assuming the individual is adequately supervised by the employer.
On May 4, the CFPB released two reports analyzing mortgage borrowers’ challenges due to the ongoing Covid-19 pandemic. The first report explores the characteristics of borrowers who are delinquent or in forbearance based a sample of nearly 662,000 loans for owner-occupied properties. The report shows that Black and Hispanic borrowers are more at risk than others, as they comprised 33 percent of borrowers in forbearance (and 27 percent of delinquent borrowers) while only constituting 18 percent of the total population of mortgage borrowers. Other findings include that (i) loans reported in March 2021 as being in forbearance or delinquent were “more likely than current loans to be single-borrower loans and to have been 30+ days delinquent in February 2020,” and (ii) “the share of loans with [a loan-to-value] ratio above 60 percent was significantly larger for borrowers in forbearance (50 percent) or delinquent (51 percent) compared to those who were current (34 percent).”
The second report examines mortgage forbearance issues described in consumer complaints from the 2020 Consumer Response Annual Report. According to the complaint bulletin, the mortgage complaint volume “has remained relatively steady since January 2020, averaging around 2,500 complaints per month,” while peaking to 3,400 complaints in March 2021—the greatest monthly mortgage complaint volume in nearly three years. The most common issue reported since January 2020 was consumers experiencing difficulty during the payment process. The bulletin also highlights that: (i) many consumers reported that servicers were not providing advice about loss mitigation until after the consumer’s forbearance had been terminated; and (ii) consumers reported long delays in having their loans modified so they could resume payments on their mortgages.
The CFPB also issued a reminder in its press release that it is seeking comments on a proposal intended to help prevent avoidable foreclosures for borrowers affected by the Covid-19 pandemic. As covered by a Buckley Special Alert, the proposal would temporarily require servicers to enhance communications with borrowers who are delinquent or in forbearance, allow servicers to offer certain streamlined loan modification options to borrowers with Covid-19-related hardships, and require servicers to afford all borrowers a special pre-foreclosure review period, if finalized. The CFPB indicated that a final rule implementing the proposal will take effect August 31—a tight timeline to address public comments, which are due May 10.
On May 3, the CFPB acting Director Dave Uejio and FTC acting Chairwoman Rebecca Kelly Slaughter released a joint notification letter to the nation’s largest apartment landlords that together own over 2 million units. The letter serves as a reminder of federal protections put in place to keep tenants in their homes throughout the Covid-19 pandemic, including an eviction moratorium recently extended by the CDC to June 30, and an interim final rule issued by CFPB last month (covered by InfoBytes here), effective May 3, that established new notice requirements under the FDCPA. The letter also encourages the landlords to “notify debt collectors working on your behalf, which may include attorneys, of the CDC Moratorium, applicable state or local moratoria, and those parties’ obligations under the FTC Act and the FDCPA, including under the CFPB’s interim final rule.” Furthermore, the letter asks landlords to examine their practices in light of the CDC moratorium to ensure that they “comply with the FTC Act and the [FDCPA]” and “remediate any harm to consumers stemming from any law violations.” As previously covered in InfoBytes, in March, the CFPB and FTC issued a joint statement indicating staff at both agencies will be monitoring and investigating eviction practices to ensure that they comply with the law.
On May 3, plaintiffs, including members of the National Association of Residential Property Managers, sued the CFPB asserting the Bureau’s recently issued interim final rule (IFR) violates their First Amendment rights. As previously covered by InfoBytes, the IFR amended Regulation F to require debt collectors to provide tenants clear and conspicuous written notice alerting them of their rights under the CDC’s moratorium on evictions in response to the Covid-19 pandemic. Under the IFR, failure to provide notice is considered a violation of the FDCPA. The plaintiffs argue that the moratorium, however, has been challenged and invalidated by several federal courts, including the U.S. Court of Appeals for the Sixth Circuit. As such, the plaintiffs contend that the IFR compels “false speech” and “requir[es p]laintiffs to lie about the lawfulness and availability” of consumers’ rights under the moratorium. The complaint asks the court to “enjoin this CFPB policy, declare it unlawful, and set it aside.”
On April 30, the CFPB released a report that analyzed the early impacts of Covid-19 on the financial status of consumers. According to the Changes in Consumer Financial Status During the Early Months of the Pandemic data point report, fewer consumers had difficulty paying bills in the initial months of the Covid-19 pandemic than in the preceding year, and both credit scores and CFPB financial well-being scores increased. In addition, “[d]espite volatile economic conditions, the average consumer’s financial status improved between June 2019 and June 2020.” These improvements were largely consistent across demographics like race, ethnicity, gender, rural status, and income. Additionally, research examining the first several months of the pandemic showed that “delinquencies as reported in credit bureau data declined, credit card debt fell even for financially vulnerable consumers, bank account balances rose, and survey-based measures of financial conditions rose.”
On April 30, the Small Business Administration (SBA) issued a procedural notice, effective immediately, extending guidance on whole loan sales applicable to lender merger and acquisition transactions where a lender has Paycheck Protection Program (PPP) loans in its portfolio. The guidance, which was set to expire May 1, will allow lenders participating in the PPP to continue to sell all of their interest in PPP loans to other participating lenders without obtaining SBA’s prior written consent. The new guidance outlines purchasing requirements and provides, among other things, that the purchasing lender “will be the party responsible to SBA with respect to all servicing actions, including requests for loan forgiveness, and will be the party eligible for the guarantee purchase of a PPP loan.”
On April 30, the Federal Reserve Board released a Supervision and Regulation Report noting that banks’ “strong capital and liquidity positions” have aided in the Covid-19 pandemic recovery. The report observed that, during the Covid-19 pandemic, banks were able to raise supplementary capital, liquidity strengthened from an influx of deposits, and capital ratios at most firms remained above regulatory minimums at the end of the year. The report also highlighted that large firms showed operational resilience through the pandemic by “[d]igitization of banking activities allow[ing] firms to continue these operations in the remote work environment.”
On April 28, the Maryland commissioner of financial regulation issued guidance that extends the “re-start date” for the ability to initiate residential foreclosures to July 1, 2021 (prior guidance has been discussed here and here.) The guidance is issued pursuant to the Maryland governor’s executive order 20-12-17-02, which amended and restated previous executive orders covered here and here.
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- Max Bonici to discuss “BSA/AML trends: What to expect with the implementation of the AML Act of 2020” at the American Bar Association Banking Law Fall Meeting