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HUD announces system to securely deliver case binders electronically for endorsement
On April 6, HUD issued Mortgagee Letter-2020-07 announcing that the FHA is accelerating the deployment of “FHA Catalyst”—a system to securely deliver case binders electronically for endorsement—which is now available. This initiative is in response to issues mortgagees have faced in complying with FHA requirements for the delivery of Single Family Forward and HECM paper case binders as well as issues the FHA has faced in processing such paper case binders in light of the Covid-19 outbreak. The letter provides an overview of FHA Catalyst and instructions on access and use of the platform.
California counties announce waiver of penalties and charges for late filing of property taxes for inability to pay caused by Covid-19
On April 4, the California State Association of Counties and the California Association of County Treasurers and Tax Collectors announced that California counties will use their existing authority to cancel penalties and other charges for homeowners, small businesses, and other property owners that are unable to pay their property taxes due to circumstances caused by Covid-19 on a case-by-case basis. The statement emphasizes that property owners who can pay or have not been directly affected by Covid-19 should still pay on time to keep critical government services running.
Freddie Mac issues guidance to seller/servicers on business continuity plans, borrower relief
On April 3, Freddie Mac issued guidance reminding seller/servicers to maintain a business continuity plan in accordance with the requirements of the Freddie Mac Single Family Seller/Servicer Guide. Sellers and servicers are expected to maintain the business continuity plan and to follow the plan during the Covid-19 pandemic. The guidance noted that Freddie Mac communicated with document custodians at four banks to confirm their business continuity plans are in place, and urged sellers using other document custodians to inquire with those custodians about their business continuity plans. Finally, the guidance summarized the relief that servicers should provide to borrowers impacted by Covid-19, including mortgage forbearance, waiving penalties and fees, halting foreclosure sales and evictions, suspending credit bureau reporting for delinquency related to forbearance, and offering loan modifications after the forbearance period.
Maryland issues executive order suspending repossessions, foreclosures, and evictions, and providing relief to commercial banks and credit unions
On April 3, the Maryland governor issued an executive order prohibiting repossessions of an automobile, truck, or chattel home by a creditor, suspending the initiation of residential foreclosures, and prohibiting residential and commercial evictions. The order also allows the Commissioner of Financial Regulation to, upon the request of a state-chartered or credit union, suspend provisions of the Maryland Code to allow such institutions to exceed statutory lending limits if the commissioner determines that doing so would not reasonably be expected to impair the safety or soundness of the institution.
Alabama issues proclamation providing relief from residential evictions and foreclosures
On April 3, the Alabama governor issued a proclamation announcing temporary relief from residential evictions and foreclosures. All state, county, and local law enforcement officers are directed to cease enforcement of any order that would result in the displacement of a person from their residence. The proclamation does not relieve individuals of any obligation to pay rent, make mortgage payments, or comply with any obligation that an individual may have under a rental agreement or mortgage. Any law that conflicts with the proclamation is suspended for the duration of the state of emergency for Covid-19.
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.
11th Circuit interprets FDCPA statute of limitations
On March 31, the U.S. Court of Appeals for the Eleventh Circuit partially affirmed a district court’s dismissal of federal and state law claims against a loan servicer, concluding that while a 1099-A form sent to the plaintiff was not an attempt to collect a debt under the FDCPA, the district court erred in determining that the claim was time-barred. The plaintiff filed suit alleging violations of the FDCPA, the Florida Consumer Collection Practices Act, the Florida Deceptive and Unfair Trade Practices Act, and the Florida Mortgage Brokerage and Lending Laws (MBBL). After the district court dismissed her initial and amended complaints, the plaintiff appealed, arguing, among other things, that the district court erred when it (i) determined that the defendant’s mailing of IRS form 1099-A was not an attempt to collect a debt under the FDCPA; (ii) dismissed her FDCPA claim as time-barred because the statute of limitations had expired; (iii) found that the defendant was not involved in the original loan transaction and therefore could not be liable for damages under the MBLL; and (iv) declined “to exercise supplemental jurisdiction” over the other state law claims after dismissing the FDCPA claims with prejudice.
On appeal, the 11th Circuit agreed that the form 1099-A “was not a communication in connection with debt collection” because it did “not demand payment, state that it was an attempt to collect a debt, or state to whom or how to make a payment of the debt.” The appellate court also agreed that the district court properly dismissed the plaintiff’s MBLL claim because she failed to plead that the defendant made her mortgage loan as required under the MBLL. The district court’s decision to dismiss the remainder of the state-law claims was also affirmed. However, the 11th Circuit disagreed with whether the plaintiff’s FDCPA claim was time-barred, concluding that while the one-year statute of limitations under the FDCPA begins to run on the date the communication is mailed, the appellate court has “never held that, when the date of mailing is in dispute and a plaintiff alleges receipt of a letter on a certain date, a court could presume a mailing date based on the date of receipt and the parties’ addresses.” (Emphasis in the original.) According to the 11th Circuit, “the district court erred in dismissing [the plaintiff’s] FDCPA claims as untimely when her complaint did not allege a date of mailing of the February mortgage statement, and it was not apparent from the face of her complaint whether her claim was time-barred.”
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.
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.”