As the widening financial crisis is expected to affect a growing number of mortgage borrowers, the Massachusetts Division of Banks has notified lenders and mortgage servicers that they should work with borrowers experiencing financial hardships due to the coronavirus pandemic.

Recognizing the industry impact of making concessions for borrowers, a group representing state bank regulators also yesterday asked the federal government to create a liquidity facility for mortgage servicers.

The Division of Banks memo said institutions are expected to implement “all reasonable and necessary change to provide relief to those adversely impacted borrowers during this state of emergency, and continuing thereafter, as necessary.”

“In anticipation of significant disruption and financial hardship related to the COVID-19 pandemic, the Division fully expects all regulated financial institutions, including Massachusetts chartered banks, credit unions, lenders, and servicers, to alleviate the adverse impact of COVID-19 on those mortgage borrowers who demonstrate that they are not able to make timely payments due to financial hardship resulting from the effects of COVID-19,” the DOB said.

Actions these institutions could take, according to the memo, include:

• Postponing foreclosures for 60 days.
• Forbearing mortgage payments for 60 or more days from their due dates.
• Waiving late payment fees and any online payment fees for a period of 60 days.
• Refraining from reporting late payments to credit rating agencies for 60 days.
• Offering borrowers an additional 60-day grace period to complete trial loan modifications, and ensuring that late payments during the COVID-19 pandemic do not affect their ability to obtain permanent loan modifications.
• Ensuring that borrowers do not experience a disruption of service if the mortgage servicer closes its office, including making available other avenues for borrowers to continue to manage their accounts and to make inquiries.
• Proactively reaching out to borrowers to explain the above-listed assistance being offered.

The DOB said reasonable and prudent efforts to assist borrowers would be considered consistent with safe and sound banking practices and would not be subject to examiner criticism.

Also on March 25, the Conference of State Bank Supervisors sent a letter to Treasury Secretary Steven Mnuchin and Federal Reserve Chair Jerome Powell requesting the liquidity facility to help mortgage servicers continue to function.

“While I applaud actions taken to allow distressed borrowers to stay in their homes during the disruption caused by COVID-19 pandemic, more is needed,” CSBS President and CEO John Ryan said in a statement. “I urge the Federal Reserve, in consultation with the Treasury Department, to establish a credit facility that supports mortgage servicers and, ultimately, their customers.”

Ryan added that state-regulated mortgage servicers need adequate capital and liquidity to work with borrowers  experiencing hardships.

“I believe that without a credit facility, a severe liquidity shortage will threaten both the ability of mortgage servicers to serve their customers and the health of the nation’s housing finance market,” Ryan said.