CFPB Proposes Rules to Help Homeowners Avoid Foreclosure

Regulatory Developments

CFPB Proposes Rules to Help Homeowners Avoid Foreclosure
On July 10, the CFPB issued a proposed rule to make it easier for homeowners to get help when they are struggling to pay their mortgage. The proposed rule would (1) require mortgage servicers to focus on helping borrowers before foreclosing and prohibit foreclosures until all possibilities for assistance have been exhausted or the borrower has stopped communicating with the servicer, (2) allow servicers to evaluate a borrower’s eligibility for financial assistance without a needing a completed application, (3) require servicers to provide more tailored notices to borrowers in the event of missed payments, and (4) mandate that borrowers who receive marketing materials in another language be able to request mortgage assistance communications in that same language. The proposed rule would not apply to small servicers. Comments submitted to the CFPB must be received by September 9, 2024.

“When struggling homeowners can get the help they need without unnecessary obstacles, it is better for borrowers, servicers, and the economy as a whole. The CFPB's proposal would reduce avoidable foreclosures and make the mortgage market more resilient during future crises.”
— Rohit Chopra, Director, CFPB

OCC Proposes Recovery Planning Standards by Certain Large Insured National Banks, Insured Federal Savings Associations, and Insured Federal Branches
On July 3, the OCC announced proposed rulemaking to revise its guidelines that establish standards for recovery planning by certain large insured national banks, federal savings associations, and federal branches. The proposal  expands the recovery planning guidelines to apply to national banks, federal savings associations, and federal branches with at least $100 billion in assets, incorporates a testing standard for recovery plans, and clarifies the role of nonfinancial risk in recovery planning. Notice of the proposed rule has been published in the Federal Register, and comments must be received by August 2, 2024.

CFPB Exams Find Loan Servicing Failures, Illegal Debt Collection Practices, and Issues with Medical Payment Products
On July 2, the CFPB published a new issue of its Supervisory Highlights, detailing key findings from recent examinations of financial providers, including student and auto loan servicers, debt collectors, and providers of medical payment products and deposit and prepaid accounts. The CFPB reported several unfair, deceptive, or abusive acts or practices and violations of the Fair Debt Collection Practices Act by loan servicers and debt collectors, including failure to notify borrowers of required payments or provide validation notices, failure to provide adequate customer support, misleading borrowers about the identity of the company, calling at times the borrower indicates are inconvenient, and using verbally harassing language when communicating with borrowers. The CFPB also warned that it intends to monitor the marketing materials and incentives, including deferred interest promotions, presented to patients in connection with medical payment products. The CFPB also noted failures by providers of deposit and prepaid accounts to adequately notify consumers and provide guidance when their accounts are frozen.

FinCEN Issues Proposed Rule to Strengthen and Modernize Financial Institutions’ AML/CFT Programs
On June 28, FinCEN announced a proposed rule, prepared in consultation with the Board of Governors of the Federal Reserve System, the OCC, the Federal Deposit Insurance Corporation, and the National Credit Union Administration, to strengthen and modernize financial institutions’ anti-money laundering and countering the financing of terrorism (AML/CFT) programs. While financial institutions have long maintained AML/CFT programs under existing regulations, the proposed rule would amend those regulations to explicitly require that such programs be effective, risk-based, and reasonably designed, enabling financial institutions to focus their resources and attention in a manner consistent with their risk profiles. The proposal would (1) amend existing program rules to explicitly require financial institutions to establish, implement, and maintain effective, risk-based, and reasonably designed AML/CFT programs with certain minimum components, including a mandatory risk assessment process; (2) require financial institutions to review government-wide AML/CFT priorities and incorporate them, as appropriate, into risk-based programs, as well as provide for certain technical changes to program requirements; and (3) promote clarity and consistency across FinCEN’s program rules for different types of financial institutions.

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