The CFPB, federal banking agencies, and state regulators are returning to pre-pandemic norms with respect to enforcement and supervision of the mortgage servicing industry. On November 10, 2021, the Board of Governors of the Federal Reserve, the Consumer Financial Protection Bureau, the Federal Deposit Insurance Corporation, the National Credit Union Administration, the Office of the Comptroller of the Currency, and state financial regulators issued a joint statement (Joint Statement) alerting mortgage servicers that the agencies are revoking the “temporary supervisory and enforcement flexibility” announced in April 2020 in response to the COVID-19 pandemic. In April 2020, the agencies had advised that they would not take supervisory or enforcement action against mortgage servicers for failing to meet certain timing requirements under the mortgage servicing rules provided that servicers made a good faith effort to furnish required notices and disclosures and took actions within a reasonable time period.
In last week’s Joint Statement, the agencies announced that the temporary flexibility announced over 18 months ago “no longer applies.” The agencies “will apply their respective supervisory and enforcement authorities, where appropriate, to address any noncompliance or violations of the Regulation X mortgage servicing rules that occur after [November 10, 2021].” According to the Joint Statement, the flexible standards are “no longer necessary” because servicers have had sufficient time to adjust their operations during the pandemic and have worked with consumers affected by COVID-19.
Notably, the Joint Statement states that the new approach also relates to servicer violations of the Protections for Borrowers Affected by the COVID-19 Emergency Under the Real Estate Settlement Procedures Act (RESPA), Regulation X (86 FR 34848), which became effective on August 31, 2021.
The Joint Statement acknowledged ongoing challenges faced by mortgage servicers and their efforts to assist consumers who are impacted by the ongoing COVID-19 pandemic. The agencies noted that they will “consider, when appropriate, the specific impact of servicers’ challenges that arise due to the COVID-19 pandemic and take those issues in account when considering any supervisory and enforcement actions.” Consideration, however, is not a promise of any leniency, and servicers should take note to ensure compliance with mortgage servicing rules in response to this announcement.
The CFPB also issued a report on Mortgage Servicing Efforts in Response to the Covid-19 Pandemic, which describes how the CFPB has responded to the “evolving needs of homeowners and CFPB supervised entities” since the onset of the pandemic, including by engaging in public outreach and performing targeted reviews of mortgage servicing complaints. The CFPB intends to continue targeted data collection and evaluation efforts to assess how individual servicers performed for consumers exiting forbearance.
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