More than 18 months after financial regulators said they would not take action against mortgage servicers for failing to meet certain timing requirements when working with borrowers, this COVID-related regulatory relief has ended.
Federal and state financial regulators said in a joint statement yesterday that mortgage servicers would be expected to meet requirements set by mortgage rules, noting that servicers have had time to adjust their operations since the start of the pandemic.
“While the COVID-19 pandemic continues to affect consumers and mortgage servicers, the agencies believe the temporary flexibility described in the April 2020 Joint Statement is no longer necessary because servicers have had sufficient time to adjust their operations by, among other things, taking steps to work with consumers affected by the COVID-19 pandemic and developing more robust business continuity and remote work capabilities,” the joint statement said.
The statement was issued by the Board of Governors of the Federal Reserve, the CFPB, the FDIC, the NCUA, the OCC and the state financial regulators.
The agencies in April 2020 had said they would not take supervisory or enforcement action against mortgage servicers for failing to meet certain timing requirements under the Regulation X mortgage servicing rules. They did expect servicers to make good faith efforts to provide any notices or disclosures required by the rules and to take related actions within a reasonable period of time.
The agencies will now resume using their regulatory authority to address noncompliance or violations of the mortgage servicing rules.
“The agencies recognize the ongoing challenges faced by mortgage servicers and their efforts to assist customers and members affected by the ongoing COVID-19 pandemic,” the joint statement said. “The agencies continue to encourage mortgage servicers to engage in these efforts.”
The joint statement noted that regulators would take into account pandemic-related challenges faced by mortgage servicers when considering any supervisory and enforcement actions, including factoring in the time needed to adjust operations to comply with yesterday’s joint statement.
In a separate statement, the CFPB pointed out that mortgage servicing rules were put in place following the Great Recession to prevent another foreclosure crisis and give homeowners a chance to find alternatives to foreclosure. More than 1 million borrowers remain in COVID-19 forbearances, and with the majority of those forbearances expected to end this year, the CFPB said, homeowners would need these protections to avoid foreclosure.
“Failures by mortgage servicers and regulators worsened the impact of the economic crisis a decade ago,” CFPB Director Rohit Chopra said in the statement. “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.”
The CFPB yesterday also released a report summarizing the steps it has taken to help struggling homeowners, including conducting targeted supervisory reviews to obtain real-time information from mortgage servicers and analyzing consumer complaints related to mortgage servicing and forbearances.
