Regulators to Step Up Servicer Scrutiny

The universe of mortgage regulators issued a joint statement on Wednesday, notifying servicers that they intend to again enforce "critical protections" for families and homeowners. The protections, first instituted during the Great Recession, are intended to prevent another foreclosure crisis as more than 1 million homeowners face the end of COVID-19 forbearance protection over the next two months.

The statement was insured by the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the Consumer Financial Protection Agency, the National Credit Union Administration, the Office of the Comptroller of the Currency, and state financial regulators.

The statement rescinds one the regulators issued on April 3, 2020 titled "Joint Statement on Supervisory and Enforcement Practices Regarding the Mortgage Servicing Rules in Response to the COVID-19 Emergency and the CARES Act." In that release, the agencies announced that they would not, until further notice, take supervisory or enforcement action against mortgage servicers for failing to meet certain timing requirements under the mortgage servicing rules as long as the servicers made good faith efforts to provide those required notices or disclosures and took the related actions within a reasonable period of time.

The agencies now say that, even as the pandemic continues to affect consumers and mortgage servicers, they believe the temporary flexibility described in the earlier statement is no longer necessary. They say servicers have had sufficient time to adjust their operations, taking steps to work with consumers affected by the COVID-19 pandemic and developing more robust business continuity and remote work capabilities.

Consumer Financial Protection Bureau CFPB Director Rohit Chopra said, "Failures by mortgage servicers and regulators worsened the impact of the economic crisis a decade ago. Regulators have learned their lesson, and we will be scrutinizing servicers to ensure they are doing all they can to help homeowners and follow the law."

CFPB also announced some of the steps it is taking as forbearances near their end.

• Conducting prioritized assessments, or targeted supervisory reviews, designed to obtain real-time information from mortgage servicers due to the elevated risk of consumer harm because of the pandemic.
• Reminding servicers that they need to dedicate enough resources and staff to ensure they can communicate clearly with homeowners, effectively assist borrowers, and reduce avoidable foreclosures during the surge in forbearance exits this fall.
• Implementing temporary safeguards to ensure that borrowers have time before foreclosure to explore their options, including loan modifications and selling their homes.
• Analyzing consumer complaint data about mortgage servicing and mortgage forbearances.
• Conducting additional, targeted reviews of high-risk complaints related to COVID-19 forbearance.