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CFPB rule provides loss mitigation options

The CFPB announced yesterday it has issued an interim final rule that will make it easier for consumers to transition out of financial hardship caused by the COVID-19 pandemic and easier for mortgage servicers to assist those consumers.

The rule makes it clear that servicers do not violate Regulation X by offering certain COVID-19-related loss mitigation options based on an evaluation of limited application information collected from the borrower. Normally, with certain exceptions, Regulation X would require servicers to collect a complete loss mitigation application before making an offer.

The loss mitigation option must meet certain criteria to qualify for an exception from the typical requirement to collect a complete application. Among other things, the option must allow the borrower to delay paying all principal and interest payments that were forborne or became delinquent as a result of a financial hardship due, directly or indirectly, to the COVID-19 emergency. Servicers may not charge any fees to borrowers in connection with the option, and the borrower’s acceptance ends any preexisting delinquency. The exception is not limited to payments forborne under the CARES Act.

Once the borrower accepts an offer for an eligible program under the interim final rule, the servicer need not exercise reasonable diligence to obtain a complete application and need not provide the acknowledgment notice that is generally required under Regulation X when a borrower submits a loss mitigation application.

The rule is effective beginning July 1, 2020. Comments on the rule will be accepted for 45 days following Federal Register publication.

Editor's note: The amendments have been posted to § 1024.41(c)(2) of Regulation X in BankersOnline's Regulations pages.

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