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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.


FHFA Foreclosure Prevention and Refinance Report

The Federal Housing Finance Agency (FHFA) has released its First Quarter 2020 Foreclosure Prevention and Refinance Report. The report shows that Fannie Mae and Freddie Mac completed 26,910 foreclosure prevention actions in the first quarter of 2020, bringing to 4.4 million the number of troubled homeowners who have been helped during the conservatorships of the Enterprises. Of these actions, 3.7 million of the foreclosure prevention actions have helped troubled homeowners stay in their homes.

Other report highlights include:

  • Forbearance: newly initiated forbearance plans rose to 170,533 in the first quarter of 2020, up from 6,975 in the fourth quarter of 2019. A majority of the forbearance actions occurred as a result of the Enterprises' response COVID-19 impacts.
  • Loan modifications: of the 16,773 loan modifications completed, 38 percent reduced borrowers' monthly payments by more than 20 percent; 64 percent were extend-term only; and 23 percent were modifications with principal forbearance.
  • Foreclose starts and sales: 7,704 third-party and foreclosure sales were completed, down 9 percent compared with the fourth quarter of 2019.
  • Foreclosure starts decreased 3 percent from 30,010 in the fourth quarter of 2019 to 28,978 in the first quarter of 2020.
  • Refinances increased to 747,464 in the first quarter, from 728,842 in the fourth quarter of 2019


    OCC will adjust assessments for COVID-19-related assets

    The OCC yesterday approved an interim final rule to reduce assessments in response to the national emergency declared in connection with the coronavirus disease (COVID-19). Under the interim final rule, assessments due on September 30, 2020, for OCC-regulated banks will be calculated using the December 31, 2019, "Consolidated Reports of Condition and Income" (Call Report) for each institution, rather than the June 30, 2020, Call Report. This change will result in lower assessments for most OCC-supervised banks.

    If a bank's assets as reported on the June 30, 2020, Call Report are lower than on the December 31, 2019, Call Report, the OCC will calculate the assessment due on September 30, 2020 for the bank using the June 30, 2020, Call Report.

    The rule was issued to ensure that OCC-regulated banks don't incur heavier assessments resulting from abnormal deposit growth stemming from the deposit of COVID-19-related loan proceeds from credit extended under the CARES Act.


    CFPB proposes QM revision and GSE Patch extension

    The Consumer Financial Protection Bureau has issued two Notices of Proposed Rulemaking to address the impending expiration of the Government-Sponsored Enterprises Patch (GSE Patch). The GSE Patch, which was a temporary definition in Regulation Z § 1026.43(e)(4)(ii)(A) that provides qualified mortgage status to certain mortgage loans eligible for purchase or guarantee by either Freddie Mac or Fannie Mae (the Government Sponsored Enterprises or GSEs) is scheduled to expire in January 2021 or when the GSEs exit conservatorship, whichever comes first.

    In the first NRPM [published July 10, 2020, at 85 FR 41716], the Bureau proposes to amend the general QM definition in Regulation Z to replace the 43% DTI limit with a price-based approach. The Bureau is proposing a price-based approach because it preliminarily concludes that a loan’s price, as measured by comparing a loan’s annual percentage rate to the average prime offer rate for a comparable transaction, is a strong indicator and more holistic and flexible measure of a consumer’s ability to repay than DTI alone. For eligibility for QM status under the General QM definition, the Bureau is proposing a price threshold for most loans as well as higher price thresholds for smaller loans, which can be important for manufactured housing and for minority consumers. The proposal would also require that lenders take into account a consumer’s income, debt, and DTI ratio or residual income and verify the consumer’s income and debts.

    In addition, although the Bureau is proposing to remove the 43 percent DTI limit and adopt a price-based approach for the General QM loan definition, the first NPRM also requests comment on certain alternative approaches that would retain a DTI limit but would raise it above the current limit of 43 percent and provide a more flexible set of standards for verifying debt and income in place of appendix Q. The proposal suggests a final rule would not be effective before April 1, 2021, and (perhaps mindful of adjustments of effective dates of past amendments) asks for comment on whether there is a day of the week or time of month that would most facilitate implementation of the proposed changes.

    In the second NPRM [published July 10, 2020, at 85 FR 41448], the Bureau proposes to amend Regulation Z to extend the GSE Patch to expire upon the effective date of a final rule regarding the first notice’s proposed amendments to the General QM loan definition in Regulation Z. The Bureau is proposing to take this action to ensure that responsible, affordable credit remains available to consumers who may be affected if the GSE Patch expires before the amendments take effect as defined in the first NPRM (which is almost certainly to be the case, given the suggested April 1 effective date for the changes in the first proposal).

    Comments on the first NPRM will be open for 60 days [ending 9/8/2020] and those on the second NPRM for 31 days [ending 8/10/2020] following publication in the Federal Register.

    UPDATE: Updated to include publication and comment deadline information.


    Additional PPP data made available

    The SBA and Treasury have announced they are making public additional data regarding the Paycheck Protection Program (PPP). SBA will disclose the business names, addresses, NAICS codes, zip codes, business type, demographic data, non-profit information, jobs supported, and loan amount ranges for loans of $150,000 or more (which accounts for nearly 75 percent of the loan dollars approved. For loans below $150,000, totals will be released, aggregated by zip code, by industry, by business type, and by various demographic categories.


    New tool for small businesses from SBA

    On Friday the SBA announced the launch of a free dedicated online tool for small businesses and non-profits to be matched with Community Development Financial Institutions, Minority Depository Institutions, Certified Development Companies, Farm Credit System lenders, Microlenders, as well as traditional smaller asset size lenders in the Paycheck Protection Program (PPP).

    The SBA Lender Match tool is an additional resource for pandemic-affected small businesses who have not applied for or received an approved PPP loan to connect with lenders. Within two business days after entering their information into the Lender Match platform, a borrower receives an email from lenders who have been matched with them. The borrower can see lenders’ requests for them to begin an application. Borrowers are then able to begin the application process directly from the email they receive. Lender Match does not accept Economic Injury Disaster Loan applications.


    FDIC Enforcement Actions Manual updated

    The FDIC has issued FIL-61-2020 announcing the update of its Formal and Informal Enforcement Actions Manual for the assessment of mandatory civil money penalties (CMPs) for certain pattern and practice violations of the National Flood Insurance Act of 1968. The manual provides direction for FDIC staff related to the work needed to pursue formal and informal enforcement actions. It is also intended to support the work of field office, regional office, and Washington office staff involved in processing and monitoring enforcement actions.


    June 2020 SCOOS

    The Federal Reserve has posted the June 2020 Senior Credit Officer Opinion Survey on Dealer Financing Terms (SCOOS), a quarterly survey providing information about the availability and terms of credit in securities financing and over-the counter derivatives markets. The SCOOS is modeled after the long-established Senior Loan Officer Opinion Survey on Bank Lending Practices, which provides qualitative information about changes in supply and demand for loans to households and businesses at commercial banks.


    OFAC targets sanctions evasion network

    Yesterday, OFAC designated three individuals and eight foreign entities, and identified two vessels as blocked property for their activities in or associated with a network attempting to evade United States sanctions on Venezuela’s oil sector.

    For identification of those targeted by OFAC, see BankersOnline's OFAC Update.


    FEMA suspending communities from flood program today

    In what appears to be another "catch-up" on required publication of community suspensions from the National Flood Insurance Program, FEMA has published at 85 FR 37019 in today's Federal Register a notice it has scheduled suspensions of communities in Idaho, Iowa, Michigan, North Carolina, Texas, Utah, and Washington today, June 19, 2020, for noncompliance with the floodplain management requirements of the program:

    • Idaho: Garden City, Meridian, and unincorporated areas of Ada County
    • Iowa: Charles City, Floyd, Leland, Nora Springs, Rockford, Russ, Scarville, Thompson, and unincorporated areas of Floyd and Winnebago Counties
    • Michigan: Bedford, Berlin, Erie, Estral Beach, Frenchtown, LaSalle, Luna Pier, and Monroe
    • North Carolina: Alliance, Bath, Bayboro, Bridgeton, Chocowinity, Emerald Isle, Greenville, Grimesland, Havelock, Kill Devil Hills, Mesic, Minnesott Beach, Nags Head, New Bern, North Topsail Beach, Oriental, River Bend, Southern Shores, Stonewall, Swansboro, Washington, and unincorporated areas of Carteret, Craven, Currituck, Hyde, Pamlico, and Washington Counties
    • Texas: Unincorporated areas of Denton County
    • Utah: Alpine, American Fork, Bluffdale, Genola, Lehi, Orem, Payson, Salem, Saratoga Springs, Spanish Fork, Springville, and unincorporated areas of Utah County
    • Washington: Bothell, Brier, Bucoda, Darrington, Edmonds, Everett, Gold Bar, Index, Lake Stevens, Lynwood, Marysville, Mill Creek, Monroe, Mountlake Terrace, Mukilteo, Stanwood, Sultan, Tenino, and unincorporated areas of Snohomish and Thurston Counties

    If a designated community completed the steps to return to compliance with the floodplain requirements before today, it will not be suspended. Lenders should verify the status of any of the listed communities in which they may be taking real estate as security for a loan before proceeding with the transaction.


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