Protections for Borrowers Affected by the COVID-19 Emergency Under the Real Estate Settlement Procedures Act (RESPA), Regulation X

Federal RegisterJun 30, 2021

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BUREAU OF CONSUMER FINANCIAL PROTECTION

12 CFR Part 1024

[Docket No. CFPB-2021-0006]

RIN 3170-AB07

Protections for Borrowers Affected by the COVID-19 Emergency Under the Real Estate Settlement Procedures Act (RESPA), Regulation X

AGENCY:

Bureau of Consumer Financial Protection.

ACTION:

Final rule; official interpretation.

SUMMARY:

The Bureau of Consumer Financial Protection (Bureau) is issuing this final rule to amend Regulation X to assist mortgage borrowers affected by the COVID-19 emergency. The final rule establishes temporary procedural safeguards to help ensure that borrowers have a meaningful opportunity to be reviewed for loss mitigation before the servicer can make the first notice or filing required for foreclosure on certain mortgages. In addition, the final rule would temporarily permit mortgage servicers to offer certain loan modifications made available to borrowers experiencing a COVID-19-related hardship based on the evaluation of an incomplete application. The Bureau is also finalizing certain temporary amendments to the early intervention and reasonable diligence obligations that Regulation X imposes on mortgage servicers.

DATES:

This final rule is effective on August 31, 2021.

FOR FURTHER INFORMATION CONTACT:

Elizabeth Spring, Program Manager, Office of Mortgage Markets; Willie Williams, Paralegal; Angela Fox or Ruth Van Veldhuizen, Counsels; or Brandy Hood or Terry J. Randall, Senior Counsels, Office of Regulations, at 202-435-7700 or

https://reginquiries.consumerfinance.gov/

. If you require this document in an alternative electronic format, please contact

CFPB_Accessibility@cfpb.gov

SUPPLEMENTARY INFORMATION:

I. Summary of the Final Rule

To provide relief for mortgage borrowers facing financial hardship due to the COVID-19 pandemic, the Bureau is finalizing amendments to Regulation X's mortgage servicing rules.

As described in more detail in part II, the COVID-19 pandemic has had a devastating economic impact in the United States, making it difficult for some borrowers to stay current on their mortgage payments. To help struggling borrowers, various Federal and State protections have been established throughout the last 16 months, including the forbearances made available by the Coronavirus Aid, Relief, and Economic Security Act (CARES Act)

and various Federal and State foreclosure moratoria.

These protections will begin to phase out over the summer. A large number of borrowers remain seriously delinquent and will be at risk of foreclosure initiation this fall. This final rule will help ensure a smooth and orderly transition as the other Federal and State protections end by providing borrowers with a meaningful opportunity to explore ways to resume making payments and avoid foreclosure. This final rule will also help promote housing security by preventing avoidable foreclosures and keeping borrowers on the path to wealth creation through homeownership. The Bureau recognizes that some foreclosures are unavoidable and that not every borrower will be able to stay in their home indefinitely.

This final rule finalizes the proposed amendments to Regulation X that the Bureau issued on April 5, 2021, with revisions as discussed herein. 86 FR 18840 (Apr. 9, 2021).

The Coronavirus Aid, Relief, and Economic Security Act, Public Law 116-136, 134 Stat. 281 (2020) (CARES Act).

Id.

Borrowers who are in forbearance, or behind on their mortgages and not in forbearance, are disproportionately Black and Hispanic, just as those workers whose re-employment continues to lag are disproportionately Black and Hispanic.

Black and Hispanic borrowers also are disproportionately likely to have less equity in their homes. Thus, Black and Hispanic borrowers, and the communities in which they live, are especially likely to benefit from this rule.

As homeownership plays the primary role in wealth creation in the United States,

a wave of foreclosures due to the current crisis may have a lasting impact on these borrowers' ability to maintain and accumulate wealth.

Bureau of Consumer Fin. Prot.,

Characteristics of Mortgage Borrowers During the COVID-19 Pandemic

at 5 (May 2021),

https://files.consumerfinance.gov/f/documents/cfpb_characteristics-mortgage-borrowers-during-covid-19-pandemic_report_2021-05.pdf

(CFPB Mortgage Borrower Pandemic Report).

Nat'l Ass'n of Home Builders,

Homeownership Remains Primary Driver of Household Wealth,

NAHB Now Blog (Feb. 18, 2021),

https://nahbnow.com/2021/02/homeownership-remains-primary-driver-of-household-wealth/

Since last spring when the CARES Act was passed, servicers placed over 7 million borrowers into forbearance programs.

During this same period, servicers have adapted to rapidly changing guidance and transitioned their own workforces to remote work. The Bureau recognizes the effort that took, and the challenge that still lies before the industry. While forbearance numbers have continued to drop,

those borrowers still in forbearance are increasingly many months, even more than a year, behind on their mortgage payments. At the same time, increasing numbers of borrowers are exiting forbearance while delinquent without loss mitigation in place.

The ways servicers may have handled loss mitigation in the past, including the allocation of resources and communication methods used, may not be as effective in these unprecedented circumstances.

Black Knight Mortg. Monitor,

April 2021 Report

at 10 (Apr. 2021),

https://cdn.blackknightinc.com/wp-content/uploads/2021/06/BKI_MM_Apr2021_Report.pdf

(Black Apr. 2021 Report).

Id.

at 7.

Id.

at 10.

The Bureau is concerned that a potentially historically high number of borrowers will seek assistance from their servicers at approximately the same time this fall, which could lead to delays and errors as servicers work to process a high volume of loss mitigation inquiries and applications. In addition, the Bureau is concerned that the circumstances facing borrowers due to the COVID-19 emergency, which may involve potential economic hardship, health conditions, and extended periods of forbearance or delinquency, may interfere with some borrowers' ability to obtain and understand important information that the existing rule aims to provide borrowers regarding the foreclosure avoidance options available to them.

Final Rule

To address these concerns, this final rule includes five key amendments to Regulation X, all of which encourage borrowers and servicers to work together to facilitate review for foreclosure avoidance options. First, to help ensure that borrowers have a meaningful opportunity to be reviewed for loss mitigation, this final rule establishes temporary special COVID-19 procedural safeguards that must be met for certain mortgages before the servicer can make the first notice or filing required by applicable law for any judicial or non-judicial foreclosure process because of a delinquency. This requirement generally is applicable only if (1) the borrower's mortgage loan obligation became more than 120 days

delinquent on or after March 1, 2020, and (2) the statute of limitations applicable to the foreclosure action being taken in the laws of the State or municipality where the property securing the mortgage loan is located expires on or after January 1, 2022. This provision expires on January 1, 2022, meaning that the procedural safeguards are not applicable if a servicer makes the first notice or filing required by applicable law for any judicial or non-judicial foreclosure process on or after January 1, 2022. A procedural safeguard has been met, and the servicer may proceed with foreclosure, if: (1) The borrower submitted a completed loss mitigation application and § 1024.41(f)(2) permits the servicer to make the first notice or filing; (2) the property securing the mortgage loan is abandoned under State or municipal law; or (3) the servicer has conducted specified outreach and the borrower is unresponsive.

Second, the final rule permits servicers to offer certain streamlined loan modification options made available to borrowers with COVID-19-related hardships based on the evaluation of an incomplete loss mitigation application. Eligible loan modifications must satisfy certain criteria that aim to establish sufficient safeguards to help ensure that a borrower is not harmed if the borrower chooses to accept an offer of an eligible loan modification based on the evaluation of an incomplete application. First, to be eligible, the loan modification may not cause the borrower's monthly required principal and interest payment to increase and may not extend the term of the loan by more than 480 months from the date the loan modification is effective. Second, if the loan modification permits the borrower to delay paying certain amounts until the mortgage loan is refinanced, the mortgaged property is sold, the loan modification matures, or, for a mortgage loan insured by the Federal Housing Administration (FHA), the mortgage insurance terminates, those amounts must not accrue interest. Third, the loan modification must be made available to borrowers experiencing a COVID-19-related hardship. Fourth, the borrower's acceptance of an offer of the loan modification must end any preexisting delinquency on the mortgage loan or the loan modification must be designed to end any preexisting delinquency on the mortgage loan upon the borrower satisfying the servicer's requirements for completing a trial loan modification plan and accepting a permanent loan modification. Finally, the servicer may not charge any fee in connection with the loan modification and must waive all existing late charges, penalties, stop payment fees, or similar charges that were incurred on or after March 1, 2020, promptly upon the borrower's acceptance of the loan modification. If the borrower accepts an offer made pursuant to this new exception, the final rule excludes servicers from certain requirements with regard to any loss mitigation application submitted prior to the loan modification offer, including exercising reasonable diligence to complete the loss mitigation application and sending the acknowledgement notice required by § 1024.41(b)(2). However, if the borrower fails to perform under a trial loan modification plan offered pursuant to the proposed new exception or requests further assistance, the final rule requires servicers to immediately resume reasonable diligence with regard to any loss mitigation application the borrower submitted prior to the servicer's offer of the trial loan modification plan and to provide the borrower with the acknowledgement notice required by § 1024.41(b)(2) with regard to the most recent loss mitigation application the borrower submitted prior to the offer that the servicer made under the new exception, unless the servicer has already provided that notice to the borrower.

Third, the final rule amends the early intervention obligations to help ensure that servicers communicate timely and accurate information to borrowers about their loss mitigation options during the current crisis. In general, the final rule requires servicers to discuss specific additional COVID-19-related information during live contact with borrowers established under existing § 1024.39(a) in two circumstances: (1) If the borrower is not in a forbearance program and (2) if the borrower is near the end of a forbearance program made available to borrowers experiencing a COVID-19-related hardship. Specifically, if the borrower is not in a forbearance program at the time the servicer establishes live contact with the borrower pursuant to § 1024.39(a) and the owner or assignee of the borrower's mortgage loan makes a forbearance program available to borrowers experiencing a COVID-19-related hardship, the servicer must inform the borrower that forbearance programs are available for borrowers experiencing such a hardship. Unless the borrower states they are not interested, the servicer must also list and briefly describe to the borrower those forbearance programs made available at that time and the actions the borrower must take to be evaluated. The servicer must also identify at least one way that the borrower can find contact information for homeownership counseling services, such as referencing the borrower's periodic statement. If the borrower is in a forbearance program made available to borrowers experiencing a COVID-19-related hardship, then during the live contact made pursuant to § 1024.39(a) that occurs at least 10 days and no more than 45 days before the scheduled end of the forbearance program, the servicer must provide certain information to the borrower. The servicer must inform the borrower of the date the borrower's current forbearance program is scheduled to end. In addition, the servicer must provide a list and brief description of each of the types of forbearance extension, repayment options, and other loss mitigation options made available by the owner or assignee of the borrower's mortgage loan at that time, and the actions the borrower must take to be evaluated for such loss mitigation options. Finally, the servicer must identify at least one way that the borrower can find contact information for homeownership counseling services, such as referencing the borrower's periodic statement. This provision is temporary and will end on October 1, 2022.

Fourth, the final rule clarifies servicers' reasonable diligence obligations when the borrower is in a short-term payment forbearance program made available to a borrower experiencing a COVID-19-related hardship based on the evaluation of an incomplete application. Specifically, the final rule specifies that a servicer must contact the borrower no later than 30 days before the end of the forbearance period if the borrower remains delinquent to determine if the borrower wishes to complete the loss mitigation application and proceed with a full loss mitigation evaluation. If the borrower requests further assistance, the servicer must exercise reasonable diligence to complete the application before the end of the forbearance program period.

Finally, the final rule defines COVID-19-related hardship to mean a financial hardship due, directly or indirectly, to the national emergency for the COVID-19 pandemic declared in Proclamation 9994 on March 13, 2020 (beginning on March 1, 2020) and continued on February 24, 2021, in accordance with section 202(d) of the National Emergencies Act (50 U.S.C.1622(d)).

II. Background

A. The Bureau's Regulation X Mortgage Servicing Rules

In January 2013, the Bureau issued a final mortgage servicing rule to implement the Real Estate Settlement Procedures Act of 1974 (RESPA) (2013 RESPA Servicing Final Rule),

and included these rules in Regulation X.

The Bureau later clarified and revised Regulation X's servicing rules through several additional notice-and-comment rulemakings.

In part, these rulemakings were intended to address deficiencies in servicers' handling of delinquent borrowers and loss mitigation applications during and after the 2008 financial crisis.

When the housing crisis began, servicers were faced with historically high numbers of delinquent mortgages, loan modification requests, and in-process foreclosures in their portfolios.

Many servicers lacked the infrastructure, trained staff, controls, and procedures needed to manage effectively the flood of delinquent mortgages they were obligated to handle.

Inadequate staffing and procedures led to a range of reported problems with servicing of delinquent loans, including some servicers misleading borrowers, failing to communicate with borrowers, losing or mishandling borrower-provided documents supporting loan modification requests, and generally providing inadequate service to delinquent borrowers.

Real Estate Settlement Procedures Act of 1974, Public Law 93-533, 88 Stat. 1724 (codified as amended at 12 U.S.C. 2601

et seq.

78 FR 10695 (Feb. 14, 2013) (2013 RESPA Servicing Final Rule). In February 2013, the Bureau also published separate “Mortgage Servicing Rules Under the Truth in Lending Act (Regulation Z)” (2013 TILA Servicing Final Rule).

See

78 FR 10902 (Feb. 14, 2013). The Bureau conducted an assessment of the RESPA mortgage servicing rule in 2018-19 and released a report detailing its findings in early 2019. Bureau of Consumer Fin. Prot.,

2013 RESPA Servicing Rule Assessment Report,

(Jan. 2019),

https://files.consumerfinance.gov/f/documents/cfpb_mortgage-servicing-rule-assessment_report.pdf

(Servicing Rule Assessment Report).

Amendments to the 2013 Mortgage Rules under the Real Estate Settlement Procedures Act (Regulation X) and the Truth in Lending Act (Regulation Z), 78 FR 44686 (July 24, 2013); Amendments to the 2013 Mortgage Rules under the Equal Credit Opportunity Act (Regulation B), Real Estate Settlement Procedures Act (Regulation X), and the Truth in Lending Act (Regulation Z), 78 FR 60382 (Oct. 1, 2013); Amendments to the 2013 Mortgage Rules under the Real Estate Settlement Procedures Act (Regulation X) and the Truth in Lending Act (Regulation Z), 78 FR 62993 (Oct. 23, 2013); Amendments to the 2013 Mortgage Rules Under the Real Estate Settlement Procedures Act (Regulation X) and the Truth in Lending Act (Regulation Z), 81 FR 72160 (Oct. 19, 2016) (2016 Mortgage Servicing Final Rule); Amendments to the 2013 Mortgage Rules Under RESPA (Regulation X) and TILA (Regulation Z), 82 FR 30947 (July 5, 2017); Mortgage Servicing Rules Under RESPA (Regulation X), 82 FR 47953 (Oct. 16, 2017). The Bureau also issued notices providing guidance on the Rule and soliciting comment on the Rule.

See, e.g.,

Applicability of Regulation Z's Ability-to-Repay Rule to Certain Situations Involving Successors-in-Interest, 79 FR 41631 (July 17, 2014); Safe Harbors from Liability Under the Fair Debt Collections Practices Act for Certain Actions in Compliance with Mortgage Servicing Rules Under the Real Estate Settlement Procedures Act (Regulation X) and the Truth in Lending Act (Regulation Z), 81 FR 71977 (Oct. 19, 2016); Policy Guidance on Supervisory and Enforcement Priorities Regarding Early Compliance With the 2016 Amendments to the 2013 Mortgage Servicing Rules Under RESPA (Regulation X) and TILA (Regulation Z), 82 FR 29713 (June 30, 2017).

See generally

2013 RESPA Servicing Final Rule,

supra

note 11, at 10699-701.

See

2013 RESPA Servicing Rule Assessment Report,

supra

note 11, at 37-60.

2013 RESPA Servicing Final Rule,

supra

note 11, at 10700.

See

U.S. Gov't Accountability Off.,

Troubled Asset Relief Program: Further Actions Needed to Fully and Equitably Implement Foreclosure Mitigation Actions,

GAO-10-634, at 14-16 (2010),

https://www.gao.gov/assets/310/305891.pdf; Problems in Mortgage Servicing from Modification to Foreclosure: Hearing Before the S. Comm. on Banking, Hous., and Urban Affairs,

111th Cong. 54 (2010) (statement of Thomas J. Miller, Att'y Gen. State of Iowa),

https://www.banking.senate.gov/imo/media/doc/MillerTestimony111610.pdf

The Bureau's mortgage servicing rules address these concerns by establishing procedures that mortgage servicers generally must follow in evaluating loss mitigation applications submitted by mortgage borrowers

and requiring certain communication efforts with delinquent borrowers.

The mortgage servicing rules also provide certain protections against foreclosure based on the length of the borrower's delinquency and the receipt of a complete loss mitigation application.

For example, Regulation X generally prohibits a servicer from making the first notice or filing required for foreclosure until the borrower's mortgage loan is more than 120 days delinquent.

These requirements are discussed more fully in the section-by-section analysis in part IV.

See generally

12 CFR 1024.41. Small servicers, as defined in Regulation Z, 12 CFR 1026.41(e)(4), are generally exempt from these requirements. 12 CFR 1024.30(b)(1).

12 CFR 1024.39.

12 CFR 1024.41(f) through (g).

12 CFR 1024.41(f)(1)(i).

The Bureau published an assessment of the 2013 RESPA Servicing Final Rule in 2019.

The assessment analyzed the effects of the rule on borrowers and servicers. Among other things, the assessment concluded that loans that became delinquent were less likely to proceed to a foreclosure sale during the months after the rule's effective date compared to months before the effective date.

Moreover, the assessment found that delinquent borrowers were somewhat more likely than they were pre-rule to start applying for loss mitigation earlier in delinquency.

Also, the assessment found that loans that became delinquent were more likely to recover from delinquency (that is, to return to current status, including through a modification of the loan terms) after the rule's effective date.

The assessment also determined that the rule's general prohibition on initiating foreclosure within the first 120 days of delinquency prevented rather than delayed foreclosures.

Finally, the assessment also found that servicing costs increased substantially between 2008 and 2013.

2013 RESPA Servicing Rule Assessment Report,

supra

note 11.

Id.

at 9.

Id.

at 11.

Id.

at 8.

Id.

at 12.

Id.

at 8.

The COVID-19 pandemic was declared a national emergency on March 13, 2020, and the emergency declaration was continued in effect on February 24, 2021.

As described in more detail below, the pandemic has had a devastating economic impact in the United States. In June of 2020, the Bureau issued an interim final rule (June 2020 IFR) amending Regulation X.

The June 2020 IFR aimed to make it easier for borrowers to transition out of financial hardship caused by the COVID-19 pandemic and for mortgage servicers to assist those borrowers. With certain exceptions, Regulation X prohibits servicers from offering a loss mitigation option to a borrower based on evaluation of an incomplete application.

The June 2020 IFR amended Regulation X to allow servicers to offer certain loss mitigation options to borrowers experiencing financial hardships due, directly or indirectly, to the COVID-19 emergency based on an evaluation of an incomplete loss mitigation application. Eligible loss mitigation options, among other things, must permit borrowers to delay paying certain amounts until the mortgage loan is refinanced, the mortgaged property is sold, the term of the mortgage loan ends, or, for a mortgage insured by the FHA, the mortgage insurance terminates.

86 FR 11599 (Feb. 26, 2021).

85 FR 39055 (June 30, 2020).

See

12 CFR 1024.41(c)(2).

B. Forbearance Programs Offered Under CARES Act

The CARES Act was signed into law on March 27, 2020. Under the CARES Act, a borrower with a federally backed loan may request a 180-day forbearance that may be extended for another 180

days at the request of the borrower if the borrower attests to having a COVID-related financial hardship. Servicers must grant these forbearance programs to borrowers with federally backed mortgages, which are mortgage loans purchased or securitized by Fannie Mae or Freddie Mac (the GSEs) and loans made, insured, or guaranteed by FHA, VA, or USDA. Through its mortgage market monitoring throughout the pandemic, the Bureau understands that servicers of mortgage loans that are not federally backed offer similar forbearance programs to borrowers affected by the COVID-19 emergency.

In February of 2021, FHA, the Federal Housing Finance Agency (FHFA), Department of Agriculture (USDA), and Department of Veterans Affairs (VA) announced they were expanding their forbearance programs beyond the minimum required by the CARES Act. The agencies extended the length of COVID-19 forbearance programs for up to an additional six months for a maximum of up to 18 months of forbearance for borrowers who requested additional forbearance by a date certain.

In addition to the expansion of the programs, on June 24, 2021, FHA, USDA, and VA extended the period for borrowers to be approved for a forbearance program from their mortgage servicer through the end of September.

FHFA has not announced a deadline to request initial forbearance for loans purchased or securitized by the GSEs. To date, data on borrowers reentering or requesting forbearance suggests borrower are still using these programs.

FHA, VA, and USDA permit borrowers who were in a COVID-19 forbearance program prior to June 30, 2020 to be granted up to two additional three-month payment forbearance programs. FHFA stated that the additional three-month extension allows borrowers to be in forbearance for up to 18 months. Eligibility for the extension is limited to borrowers who are in a COVID-19 forbearance program as of February 28, 2021, and other limits may apply.

Id.

The Bureau recognizes that the government agencies may adjust their programs further in the coming months, and the Bureau will continue to coordinate with the agencies.

While forbearance has been a resource for many borrowers, not all borrowers will be able to recover from such severe delinquency. As discussed more fully in part VII, historical data suggests that many borrowers with who are delinquent a year or longer have trouble resuming payments successfully and are more likely to experience foreclosure than borrowers with shorter delinquencies. Additionally, long-term forbearance can erode equity, which may make selling the home as an alternative to foreclosure less viable. The risks of extended forbearance and severe delinquency are more pronounced in some communities. For example, Bureau research found that, during the pandemic, mortgage forbearance and delinquency rates have been significantly more common in communities of color and lower-income areas.

Since homeownership rates vary significantly by race and ethnicity, if borrowers of these communities are not able to recover and are displaced from their homes, as a result of foreclosure, it will make homeownership more unattainable in the future, thus widening the divide for this population of borrowers. For example, in 2019, the homeownership rate among white non-Hispanic Americans was approximately 73 percent, compared to 42 percent among Black Americans. The homeownership rate was 47 percent among Hispanic or Latino Americans, 50 percent among American Indians or Alaska Natives, and 57 percent among Asian or Pacific Islander Americans.

Given the racial inequities in homeownership and disproportionately higher mortgage forbearance and delinquency in communities of color and lower income areas, the Bureau anticipates that these communities are especially likely to benefit from the protections of this rule.

CFPB Mortgage Borrower Pandemic Report,

supra

note 5.

USAFacts,

Homeownership rates show that Black Americans are currently the least likely group to own homes

(Oct. 16, 2020),

https://usafacts.org/articles/homeownership-rates-by-race/.

C. Borrowers With Loans in Forbearance

There is a lot of uncertainty about the number of borrowers who will exit forbearance this fall. The volume of borrowers exiting forbearance programs is expected to fluctuate throughout the summer as borrowers' forbearance periods end and borrowers either exit forbearance or extend their forbearance for another three-month period. June 2021 presents a substantial period of potential exits of early forbearance entrants, who reached 15 months of forbearance in June. Black Knight estimates there could be slightly fewer than 400,000 exits in June if current trends continue.

This will be the last review for exit or extension before the review in September for borrowers who entered forbearance in March of 2020 and who will reach the maximum 18 months of forbearance that month. While a significant number of early entrants exited forbearance in the last 60 days,

an estimated 900,000 borrowers could still exit forbearance by the end of 2021.

As a result, this fall, servicers may need to assist a significant number of borrowers with post-forbearance loss mitigation review. As of May 18, 2021, Black Knight reports 5 percent of borrowers remain past due on their mortgage but are in active loss mitigation.

This number may also fluctuate as borrowers who remain in forbearance may not be able to cure their delinquency when they exit forbearance and many borrowers may need a more permanent reduction in their mortgage payment amount through a loan modification.

Id.

at 8.

An estimated 413,000 borrowers exited forbearance in May.

Id.

at 9.

Id.

Black Apr. 2021 Report,

supra

note 7, at 10.

As of May 25, 2021, forbearance program starts hit their highest level in several weeks.

The increase in forbearance program starts can be attributed to elevated volume of borrowers who were previously in forbearance during the COVID-19 emergency reentering or restarting forbearance.

A similar scenario was observed after a spike in exits in early October 2020 as restart activity increased then as well. This was when the first wave of forbearance entrants reached their six-month review for extension and removal.

There was also a slight increase in new forbearance plan starts. This may be an indication that many borrowers continue to experience mortgage payment uncertainty.

Andy Walden,

Forbearance Volumes Increase Again Moderate Opportunity for Additional Improvement in June,

Black Knight Mortg. Monitor Blog (May 28, 2021),

https://www.blackknightinc.com/blog-posts/forbearance-volumes-increase-again-moderate-opportunity-for-additional-improvement-in-early-june/?utm_term=Forbearance%20Volumes%20Increase%20Again%2C%20Moderate%20Opportunity%20for%20Additional%20Improvement%20in%20Early%20June&utm_campaign=An%20Update%20from%20Vision%20%5Cu2013%20Black%20Knight%27s%20Blog&utm_content=email&utm_source=Act-On_Software&utm_medium=RSS%20Email

(Black May 2021 Blog).

A borrower that “restarts” a forbearance program is a borrower whose loan was previously in forbearance, who formally exited the forbearance program, arranged to pay-off any delinquent amounts, but ultimately reentered into a forbearance program.

Black Apr. 2021 Report,

supra

note 7, at 8.

D. Post-Forbearance Options for Borrowers Affected by the COVID-19 Emergency

Since the beginning of the COVID-19 emergency, investors and servicers have implemented several post-forbearance repayment options and other loss mitigation options to assist borrowers experiencing a COVID-19-related

hardship. For example, servicers have offered borrowers repayment plans, payment deferral programs or partial claims programs, and loan modification programs. There are additional options for borrowers who find themselves unable to stabilize their finances or do not wish to remain in their home; servicers also offer short sales or deed-in-lieu of foreclosure as an alternative to foreclosure.

E. Loans Exiting Forbearance

As of April 2021, there were 1.9 million borrowers 90 days or more delinquent on their mortgage payments.

Of those borrowers, 90 percent are either in forbearance or are involved in other loss mitigation discussions with their servicers.

This includes loans that reentered or restarted forbearance previously. For loans that became seriously delinquent after the COVID-19 emergency, 97 percent of these loans are either in forbearance programs or other loss mitigation options.

Black Apr. 2021 Report,

supra

note 7, at 5.

Id.

While the industry seems to have recovered from the peak periods of forbearance, many factors in the market suggest that overall risk is still elevated. Since January 2020,

there have been approximately 7.2 million loans that have entered a forbearance program.

Of the subset of loans that that exited forbearance and have either cured or received a workout solution, such as loss mitigation, approximately 3.3 million borrowers are reperforming as of May 2021.

Another 1.2 million have paid-off their mortgage in full most likely through refinancing or selling their home.

In addition, as of May 18, 2021, there were an estimated 365,000 borrowers who have exited forbearance and were in an active loss mitigation option.

As the population of borrowers exiting after 18 months of forbearance (and possibly as many missed payments) grows, the Bureau expects the number of borrowers who will not be able to bring their mortgage current will also grow. Many of these borrowers will need to be evaluated for permanent loss mitigation, such as loan modifications, which can decrease their monthly payment, to avoid foreclosure. Also noted earlier, there is a high volume of borrowers who remain in prolonged forbearance that are FHA and VA borrowers. The programs offered by these borrowers may be more complicated to navigate or streamlined products may not be available resulting in the need for higher-touch communication with their servicer.

Black Knight's Mortgage Monitoring forbearance data started January 2020.

See

Black Knights Mortg. Monitor,

January 2021 Report

(Jan. 2021),

https://cdn.blackknightinc.com/wp-content/uploads/2021/03/BKI_MM_Jan2021_Report.pdf

(Black Jan. 2021 Report).

Supra

note 7, at 10.

Id.

If borrowers who are currently in an eligible forbearance program request an extension to the maximum time offered by the government agencies, those loans that were placed in a forbearance program early on in the pandemic (March and April 2020) will reach the end of their maximum 18-month forbearance period in September and October of 2021. Black Knight data suggested as of mid-March, there would be an estimated 475,000 programs on track to remain active and reach their 18-month expirations at the end of September, with another 275,000 at the end of October.

However, due to recent forbearance exits, those estimates have now fallen to approximately 385,000 and 225,000.

These numbers are expected to fluctuate depending on exit volume of early forbearance entrants, especially near the end of June 2021 during the 15-month review. However, even with the recent exits, there could be nearly 900,000 borrowers exiting forbearance by the end of the year.

This could pose challenges for servicers.

Id.

at 9.

Id.

This potentially historically high volume of borrowers exiting forbearance within a short period of time could strain servicer capacity, possibly resulting in delays or errors in processing loss mitigation requests. It remains unclear how many borrowers in a forbearance program will exit forbearance at 15 months in June rather than exercising any additional remaining 3-month extensions.

The Bureau is not aware of another time when this many mortgage borrowers were in forbearances of such long duration at once, or another time when as many mortgage borrowers were forecast to exit forbearance within a relatively short period of time. This lack of historical precedent creates uncertainty. The Bureau anticipates that many borrowers who continue to be adversely affected by the COVID-19 emergency will utilize the maximum allowable months of forbearance and most will exit in the fall.

F. Delinquent Loans Not in a Forbearance Program or Loss Mitigation

Even though millions of borrowers have received assistance through forbearance programs, there are still thousands of borrowers who are delinquent or in danger of becoming delinquent and are not in a forbearance program or in some type of loss mitigation.

As of end of April 2021, there were an estimated 158,000 seriously delinquent borrowers who were delinquent before the pandemic started and are not in a forbearance program. There are another 33,000 borrowers who became seriously delinquent after the pandemic began and had not entered a forbearance program and were not in active loss mitigation.

Id.

at 11.

In addition, as of May 18, 2021, there were 168,000 forbearance program exits by borrowers who are not yet in loss mitigation and remain delinquent.

However, more than an estimated 110,000 of those loans were already delinquent before the COVID-19 emergency.

Id.

at 10.

Id.

G. Loans at Heightened Risk of Avoidable Foreclosure

Since the CARES Act took effect in March of 2020, various Federal and State foreclosure moratoria have been established. As of June 24, 2021, FHFA, FHA, VA, and USDA had emergency foreclosure moratoria in effect until July 31, 2021.

Most foreclosure proceedings have been halted as a result of the moratoria, and therefore foreclosures are at historic lows.

In April 2021, there were 3,700 foreclosures initiated and the

foreclosure inventory was down 26 percent from the same time last year.

See

Press Release, The White House,

FACT SHEET: Biden-Harris Administration Announces Initiatives to Promote Housing Stability By Supporting Vulnerable Tenants and Preventing Foreclosures

(June 24, 2021),

https://www.whitehouse.gov/briefing-room/statements-releases/2021/06/24/fact-sheet-biden-harris-administration-announces-initiatives-to-promote-housing-stability-by-supporting-vulnerable-tenants-and-preventing-foreclosures/

(the Department of Housing and Urban Development (HUD), Department of VeteransAffairs (VA), and Department of Agriculture (USDA)—will extend their respective foreclosure moratorium for one, final month, until July 31, 2021). Furthermore, the Bureau recognizes that these government agencies may adjust their programs further in the coming months, and the Bureau will continue to coordinate with these agencies.

ATTOM Data Solutions,

Q3 2020 U.S. Foreclosure Activity Reaches Historical Lows as the Foreclosure Moratorium Stalls Filings

(Oct. 15, 2020),

https://www.attomdata.com/news/market-trends/foreclosures/attom-data-solutions-september-and-q3-2020-u-s-foreclosure-market-report/

Black Apr. 2021 Report,

supra

note 7, at 3.

In addition, before the pandemic, foreclosure activity was at half the normal rate.

Typically, about 1 percent of loans are in some stage of foreclosure annually.

In early 2020, the foreclosure rate was below average at about 0.5 percent.

In January 2020, there were about 245,000 loans in the foreclosure process when the pandemic started.

Statista,

Foreclosure rate in the United States from 2005-2020,

(Apr. 15, 2021),

https://www.statista.com/statistics/798766/foreclosure-rate-usa/

Id.

Since the Federal and State moratoria have been in place, most of these borrowers have been protected but are at heightened risk of referral to foreclosure or foreclosure soon after the moratoria end if they do not resolve their delinquency or reach a loss mitigation agreement with their servicer. The Bureau's mortgage servicing rules generally prohibit servicers from making the first notice or filing required for foreclosure until the borrower's mortgage loan obligation is more than 120 days delinquent.

Even where forbearance programs pause or defer payment obligations, they do not necessarily pause delinquency.

A borrower's delinquency may begin or continue during a forbearance period if a periodic payment sufficient to cover principal, interest, and, if applicable, escrow is due and unpaid during the forbearance. Because the forbearance programs offered as a result of the COVID-emergency generally do not pause delinquency and borrowers may be delinquent for longer than 120 days, it is possible that a servicer may refer the loan to foreclosure soon after a borrower's forbearance program ends unless a foreclosure moratorium or other restriction is in place.

12 CFR 1024.41(f).

See also

12 CFR 1024.30(c)(2) (limiting the scope of this provision to a mortgage loan secured by a property that is the borrower's principal residence).

For purposes of Regulation X, a preexisting delinquency period could continue or a new delinquency period could begin even during a forbearance program that pauses or defers loan payments if a periodic payment sufficient to cover principal, interest, and, if applicable, escrow is due and unpaid according to the loan contract during the forbearance program. 12 CFR 1024.31 (defining delinquency as the “period of time during which a borrower and a borrower's mortgage loan obligation are delinquent” and stating that “a borrower and a borrower's mortgage obligation are delinquent beginning on the date a periodic payment sufficient to cover principal, interest, and, if applicable, escrow becomes due and unpaid, until such time as no periodic payment is due and unpaid.”). However, it is important to note that Regulation X's definition of delinquency applies only for purposes of the mortgage servicing rules in Regulation X and is not intended to affect consumer protections under other laws or regulations, such as the Fair Credit Reporting Act (FCRA) and Regulation V. The Bureau clarified this relationship in the Bureau's 2016 Mortgage Servicing Final Rule. 81 FR 72160, 72193 (Oct. 19, 2016). Under the CARES Act amendments to the FCRA, furnishers are required to continue to report certain credit obligations as current if a consumer receives an accommodation and is not required to make payments or makes any payments required pursuant to the accommodation.

See

Bureau of Consumer Fin. Prot.,

Consumer Reporting FAQs Related to the CARES Act and COVID-19 Pandemic

(Updated June 16, 2020),

https://files.consumerfinance.gov/f/documents/cfpb_fcra_consumer-reporting-faqs-covid-19_2020-06.pdf

(for further guidance on furnishers' obligations under the FCRA related to the COVID-19 pandemic).

As of April 2021, there were still an estimated 1.9 million borrowers in forbearance programs who were more than 90 days behind on their mortgage payments.

While the national delinquency rate fell to 4.66 percent in April, it remains about 1.5 percent above its pre-pandemic level.

Supra

note 7 (1.77 million 90-day delinquencies plus 153k active foreclosures).

Id.

at 3.

The Bureau remains focused on borrowers who might be at heightened risk of avoidable foreclosure. The Bureau issued on May 4, 2021, a research brief titled,

Characteristics of Mortgage Borrowers During the COVID-19 Pandemic,

which showed that some borrowers and communities are more at risk than others. The data from the brief showed that borrowers in forbearance or delinquent are disproportionately Black and Hispanic.

For example, 33 percent of borrowers in forbearance (and 27 percent of delinquent borrowers) are Black or Hispanic, while only 18 percent of the total population of mortgage borrowers are Black or Hispanic.

CFPB Mortgage Borrower Pandemic Report,

supra

note 5.

Id.

Forbearance and delinquency are significantly more common in communities of color (defined as majority minority census tracts) and lower-income communities (defined by census tract income quartiles).

If borrowers are displaced from their homes as a result of avoidable foreclosure, it will make homeownership more unattainable in the future, thus potentially widening the wealth divide for this population of borrowers.

Id.

H. Borrower and Servicer Engagement During the Pandemic

The Bureau is closely monitoring mortgage servicers to determine how they are working with borrowers to achieve positive outcomes for borrowers during the current crisis.

Among other things, the Bureau has utilized its supervisory authority to obtain current information about servicer activities. For example, in May of 2020, the Bureau began conducting high-level Prioritized Assessments (PA) in response to the pandemic.

The PAs were designed to obtain real-time information from an expanded group of supervised entities that operate in markets posing elevated risk of consumer harm due to pandemic-related issues. The Bureau, through its supervision program, analyzed pandemic-related market developments to determine where issues were most likely to pose risk to consumers. Supervision currently is conducting follow-up on the issues covered in the 2020 Prioritized Assessments as well as the current issues related to economic hardships consumers are facing in the ongoing pandemic. This work may be conducted as part of ongoing monitoring, in a supervisory inquiry apart from a scheduled examination, in a scheduled examination, or in some cases, through enforcement. For example, Supervision is reviewing instances where servicers did not implement the CARES Act properly, such as charging fees that are not charged if the borrower made all contractual payments on time, failing to process CARES Act forbearances where borrowers made proper requests for the forbearances, or failing to comply with the Fair Credit Reporting Act's requirements to report the credit obligation or account appropriately. Supervision is conducting oversight to ensure these servicers take timely action to reverse fees, provide full remediation to affected borrowers, and implement processes to promote compliance moving forward.

Bureau of Consumer Fin. Prot.,

Supervisory Highlights COVID-19 Prioritized Assessments Special Edition,

Issue 23, (January 2021),

https://files.consumerfinance.gov/f/documents/cfpb_supervisory-highlights_issue-23_2021-01.pdf

In March 2021, the volume of overall mortgage complaints to the Bureau increased to more than 3,400 complaints, the greatest monthly mortgage complaint volume since April 2018.

Mortgage complaints mentioning forbearance or related terms peaked in April 2020. Since this initial spike and subsequent decrease in May and June 2020, the volume of mortgage forbearance complaints remained steady

until increasing again in March 2021. The number of borrowers selecting the struggling to pay mortgage issue increased in March and April 2020. That number decreased in the following months. It increased again in 2021 but has only just regained pre-pandemic levels.

The Bureau is continuing to monitor complaint data about mortgage servicers.

Bureau of Consumer Fin. Prot.,

Complaint Bulletin: Mortgage forbearance issues described in consumer complaints

(May 2021),

https://files.consumerfinance.gov/f/documents/cfpb_mortgage-forbearance-issues_complaint-bulletin_2021-05.pdf

Id.

The Bureau encourages servicers to use all available tools to reach struggling homeowners and to do so in advance of the end of the forbearance period and expects servicers to handle inquiries promptly, to evaluate income fairly, and to work with borrowers throughout the loss mitigation process.

III. Summary of the Rulemaking Process

On April 5, 2021, the Bureau issued a proposed rule to encourage servicers and borrowers to work together on loss mitigation before the servicer can initiate the foreclosure process. The comment period closed on May 10, 2021.

In response to the proposal, the Bureau received over 200 comments from individual consumers, consumer advocate commenters, State Attorneys General, industry, and others. Many commenters expressed general support for the proposed rule, articulating, for example, the importance of providing clear and consistent information to delinquent borrowers about all of their options. Some commenters expressed general support for the proposed rule and stated that they believed the proposal would give time for borrowers to recover economically and explore loss mitigation options to avoid foreclosure. Some commenters expressed concern about the proposal generally, citing, for example, the proposal's potential economic impact on the housing market and specific industries. The Bureau also received requests from commenters to alter, clarify, or remove specific provisions of the proposed rule, with some focusing on issues relating to current industry practices and capacity and some highlighting the need to ensure consumers have the best information and resources available to them at the most appropriate times. As discussed in more detail below, the Bureau has considered comments that address issues within the scope of the proposed rule in adopting this final rule.

In addition, some commenters expressed the view that the statement that the Bureau, along with other Federal and State agencies, issued on April 3, 2020 (Joint Statement), and that announced certain supervisory and enforcement flexibility for mortgage servicers in light of the national emergency

may undermine the proposed amendments and urged the Bureau to revoke the Joint Statement. The Joint Statement provides that the agencies do not intend to take supervisory or enforcement action against servicers for specified delays in sending certain notices and taking certain actions required by Regulation X. The Joint Statement merely expresses the agencies' intent regarding enforcement and supervision priorities and does not alter existing legal requirements, including a borrower's private right of action under § 1024.41. The Bureau also issued FAQs on April 3, 2020 as a companion to the Joint Statement to provide mortgage servicers with enhanced clarity about existing flexibility in the mortgage servicing rules that they can use to help consumers during the COVID-19 pandemic.

Those FAQs state unequivocally that servicers must comply with Regulation X during the COVID-19 pandemic emergency.

Bureau of Consumer Fin. Prot.,

Joint Statement on Supervisory and Enforcement Practices Regarding the Mortgage Servicing Rules in Response to the COVID-19 Emergency and the CARES Act

(Apr. 3, 2020),

https://files.consumerfinance.gov/f/documents/cfpb_interagency-statement_mortgage-servicing-rules-covid-19.pdf

Bureau of Consumer Fin. Prot.,

Bureau's Mortgage Servicing Rules FAQs related to the COVID-19 Emergency

(Apr. 3, 2020),

https://files.consumerfinance.gov/f/documents/cfpb_mortgage-servicing-rules-covid-19_faqs.pdf

In addition, the Bureau recently released a Compliance Bulletin and Policy Guidance (Bulletin) announcing the Bureau's supervision and enforcement priorities regarding housing insecurity in light of heightened risks to consumers needing loss mitigation assistance in the coming months as the COVID-19 foreclosure moratoriums and forbearances end.

The Bureau specified that the Bureau intends to continue to evaluate servicer activity consistent with the Joint Statement, provided servicers are demonstrating effectiveness in helping consumers, in accord with the Bulletin.

The Bulletin makes clear that the Bureau intends to consider a servicer's overall effectiveness in communicating clearly with consumers, effectively managing borrower requests for assistance, promoting loss mitigation, and ultimately reducing avoidable foreclosures and foreclosure-related costs. It reiterates that the Bureau intends to hold mortgage servicers accountable for complying with Regulation X with the aim of ensuring that homeowners have the opportunity to be evaluated for loss mitigation before the initiation of foreclosure.

86 FR 17897 (Apr. 7, 2021).

News Release, Bureau of Consumer Fin. Prot.,

CFPB Compliance Bulletin Warns Mortgage Servicers: Unprepared is Unacceptable

(Apr. 21, 2021),

https://www.consumerfinance.gov/about-us/newsroom/cfpb-compliance-bulletin-warns-mortgage-servicers-unprepared-is-unacceptable/

The Bureau believes that the flexibility provided in the Joint Statement and the clarity provided by the FAQs enable servicers to provide borrowers with timely assistance. The Bulletin reinforces the Bureau's expectation that all borrowers are treated fairly and have the opportunity to get the assistance they need. The Bureau believes that these statements of supervisory and enforcement policy are consistent with the final rule. The Bureau will continue to engage in supervisory and enforcement activity to ensure that mortgage servicers are meeting the Bureau's expectations regarding the provision of effective assistance to borrowers and prevention of avoidable foreclosures.

IV. Legal Authority

The Bureau is finalizing this rule pursuant to its authority under RESPA and the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act),

including the authorities, discussed below. The Bureau is issuing this final rule in reliance on the same authority relied on in adopting the relevant provisions of the 2013 RESPA Servicing Final Rule,

as discussed in detail in the Legal Authority and Section-by-Section Analysis of the 2013 RESPA Servicing Final Rule.

Dodd-Frank Wall Street Reform and Consumer Protection Act, Public Law 111-203, 124 Stat. 1376 (2010).

2013 RESPA Servicing Final Rule,

supra

note 11.

A. RESPA

Section 19(a) of RESPA, 12 U.S.C. 2617(a), authorizes the Bureau to prescribe such rules and regulations, to make such interpretations, and to grant such reasonable exemptions for classes of transactions, as may be necessary to achieve the purposes of RESPA, which include its consumer protection purposes. In addition, section 6(j)(3) of RESPA, 12 U.S.C. 2605(j)(3), authorizes the Bureau to establish any requirements necessary to carry out section 6 of RESPA, section 6(k)(1)(E) of RESPA, and 12 U.S.C. 2605(k)(1)(E) and authorizes the Bureau to prescribe regulations that are appropriate to carry out RESPA's consumer protection

purposes. The consumer protection purposes of RESPA include ensuring that servicers respond to borrower requests and complaints in a timely manner and maintain and provide accurate information, helping borrowers prevent avoidable costs and fees, and facilitating review for foreclosure avoidance options. The amendments to Regulation X in this final rule are intended to achieve some or all these purposes.

Specifically, and as described below, during the COVID pandemic, borrowers have faced unique circumstances including potential economic hardship, health conditions, and extended periods of forbearance. Because of these unique circumstances, the procedural safeguards under the 2013 RESPA Servicing Final Rule and subsequent amendments to date, may not have been sufficient to facilitate review for foreclosure avoidance. Specifically, the Bureau is concerned that the present circumstances may interfere with these borrowers' ability to obtain and understand important information that the existing rule aims to provide borrowers regarding the foreclosure avoidance options available to them. As a result, the Bureau believes that a substantial number of borrowers will not have had a meaningful opportunity to pursue foreclosure avoidance options before exiting their forbearance or the end of current foreclosure moratoria.

The Bureau is also concerned that based on the unique circumstances described above, there exists a significant risk of a large number of potential borrowers seeking foreclosure avoidance options in a relatively short time period. Such a large wave of borrowers could overwhelm servicers, potentially straining servicer capacity and resulting in delays or errors in processing loss mitigation requests.

These strains on servicer capacity coupled with potential fiduciary obligations to foreclose could result in some servicers failing to meet required timeline and accuracy obligations as well as other obligations under the existing rule with resulting harm to borrowers.

The Bureau recognizes that other Federal agencies may take steps to protect borrowers from avoidable foreclosures in the aftermath of the pandemic in light of the number of borrowers exiting forbearance and an associated increased need for loss mitigation assistance. The Bureau believes that these efforts would be focused on federally backed mortgage loans. In that event, the final rule may have less impact on those loans. Nevertheless, even in that circumstance, the Bureau believes that the rule is necessary to serve the purposes of RESPA with respect to private mortgage loans.

In light of these unique circumstances, the Bureau's interventions are designed to provide advance notice to borrowers about foreclosure avoidance options and forbearance termination dates, as well as to provide new procedural safeguards. The interventions aim to help borrowers understand their options and encourage them to seek available loss mitigation options at the appropriate time while also allowing sufficient time for servicers to conduct a meaningful review of borrowers for such options in the present circumstances that the existing rules were not designed to address.

B. Dodd-Frank Act

Section 1022(b)(1) of the Dodd-Frank Act, 12 U.S.C. 5512(b)(1), authorizes the Bureau to prescribe rules “as may be necessary or appropriate to enable the Bureau to administer and carry out the purposes and objectives of the Federal consumer financial laws, and to prevent evasions thereof.” RESPA is a Federal consumer financial law.

The authority granted to the Bureau in Dodd-Frank Act section 1032(a) is broad and empowers the Bureau to prescribe rules regarding the disclosure of the “features” of consumer financial protection products and services generally. Accordingly, the Bureau may prescribe rules containing disclosure requirements even if other Federal consumer financial laws do not specifically require disclosure of such features. In addition, section 1032(a) of the Dodd-Frank Act authorizes the Bureau to prescribe rules to ensure that the features of any consumer financial product or service, both initially and over the term of the product or service, are fully, accurately and effectively disclosed to consumers in a manner that permits consumers to understand the costs, benefits, and risks associated with the product or service, in light of the facts and circumstances.

Dodd-Frank Act section 1032(c) provides that, in prescribing rules pursuant to Dodd-Frank Act section 1032, the Bureau “shall consider available evidence about consumer awareness, understanding of, and responses to disclosures or communications about the risks, costs, and benefits of consumer financial products or services.” 12 U.S.C. 5532(c). Accordingly, in developing the final rule under Dodd-Frank Act section 1032(a), the Bureau has considered available studies, reports, and other evidence about consumer awareness, understanding of, and responses to disclosures or communications about the risks, costs, and benefits of consumer financial products or services.

The Bureau is unaware of research that explicitly investigates the link between COVID-19-related stress and comprehension of information about forbearance and foreclosure and solicited comment on available evidence. No commenters provided additional evidence. However, previous research demonstrates that prolonged or excessive stress can impair decision-making and may be associated with reduced cognitive control, including in financial contexts.

See, e.g.,

Katrin Starcke & Matthias Brand,

Effects of stress on decisions under uncertainty: A meta-analysis,

142 Psych. Bulletin 909 (2016),

https://doi.apa.org/doi/10.1037/bul0000060

. Further research has shown that thinking that one is or could get seriously ill can lead to stress that negatively affects consumer decision-making.

See, e.g.,

Barbara Kahn & Mary Frances Luce,

Understanding high-stakes consumer decisions: mammography adherence following false-alarm test results,

22 Marketing Sci. 393 (2003),

https://doi.org/10.1287/mksc.22.3.393.17737

. Additionally, research conducted in the last year has identified substantial variability in (1) COVID-19-related anxiety and traumatic stress, which has been linked to consumer behavior including panic-buying; and (2) perceived threats to physical and psychological well-being.

See, e.g.,

Steven Taylor

et al., COVID stress syndrome: Concept, structure, and correlates,

37 Depression & Anxiety 706 (2020),

https://doi.org/10.1002/da.23071;

Frank Kachanoff

et al., Measuring realistic and symbolic threats of COVID-19 and their unique impacts on well-being and adherence to public health behaviors,

Soc. Psych. & Personality Sci. 1 (2020),

https://journals.sagepub.com/doi/pdf/10.1177/1948550620931634

. Taken together, the available evidence suggests that experiencing heightened stress and anxiety can impair decision-making in financial contexts, and this association may be particularly strong during the COVID-19 pandemic. In addition, the Bureau's assessment of the 2013 RESPA Servicing Final Rule in 2019 analyzed the effects of the early intervention disclosures and found that after the effective date of the early intervention requirements, delinquent borrowers were somewhat more likely than they were pre-Rule to start applying for loss mitigation earlier in delinquency. 2013 RESPA Servicing Rule Assessment Report,

supra

note 11, at 113.

In addition, section 1032(a) of the Dodd-Frank Act authorizes the Bureau to prescribe rules to ensure that the features of any consumer financial product or service, both initially and over the term of the product or service, are fully, accurately and effectively disclosed to consumers in a manner that permits consumers to understand the costs, benefits, and risks associated with the product or service, in light of the facts and circumstances.

V. Section-by-Section Analysis

Section 1024.31 Definitions

COVID-19-Related Hardship

The Bureau proposed to define a new term, “a COVID-19-related hardship,” for purposes of subpart C. The proposal defined COVID-19-related hardship to mean a financial hardship due, directly or indirectly, to the COVID-19 emergency as defined in the Coronavirus Economic Stabilization Act, section 4022(a)(1) (15 U.S.C.

9056(a)(1)). The Bureau solicited comment on this proposed definition.

A few commenters, including some industry commenters and individuals, stated that the definition was too broad and would include individuals with hardships that commenters alleged were not due to the COVID-19 emergency. Others urged the Bureau to adopt a definition that more precisely detailed the amount of financial loss sufficient to constitute a financial hardship.

The Bureau declines to narrow the definition as requested. The Bureau modeled this definition after section 4022 of the CARES Act, which established the forbearance program made available for borrowers with federally backed mortgages. Servicers have utilized this definition since March 23, 2020 when the CARES Act took effect and have experience with its application. A new more tailored definition would be harder for servicers to implement before the rule takes effect.

The Bureau also received a suggestion during its interagency consultation process that the Bureau should tie the definition to the national emergency itself rather than the national emergency as defined in section 4022 of the CARES Act because the covered period of section 4022 of the CARES Act is undefined and the reference to that section may cause confusion. In addition, the March 13, 2020 national emergency referenced in section 4022 of the CARES Act was continued on February 24, 2021.

Even though the CARES Act section referenced in the proposal refers to the national emergency declared on March 13, 2020, it is possible that the lack of clarity about the covered period in section 4022 itself may create confusion. The Bureau is revising the definition for clarity.

Presidential Action, The White House,

Notice on the Continuation of the National Emergency Concerning the Coronavirus Disease 2019 (COVID-19) Pandemic

(Feb. 24, 2021),

https://www.whitehouse.gov/briefing-room/presidential-actions/2021/02/24/notice-on-the-continuation-of-the-national-emergency-concerning-the-coronavirus-disease-2019-covid-19-pandemic/.

For the reasons discussed above, the Bureau is finalizing the definition of COVID-19-related hardship to mean a financial hardship due, directly or indirectly, to the national emergency for the COVID-19 pandemic declared in Proclamation 9994 on March 13, 2020 (beginning on March 1,2020) and continued on February 24, 2021, in accordance with section 202(d) of the National Emergencies Act (50 U.S.C. 1622(d)).

Section 1024.39 Early Intervention

39(a) Live Contact

Currently, § 1024.39(a) provides that a servicer must make good faith efforts to establish live contact with delinquent borrowers no later than the borrower's 36th day of delinquency and again no later than 36 days after each payment due date so long as the borrower remains delinquent.

Promptly after establishing live contact, the servicer must inform the borrower about the availability of loss mitigation options, if appropriate.

Current comment 39(a)-4.i clarifies that the servicer has the discretion to determine whether it is appropriate to inform the borrower of loss mitigation options.

Current comment 39(a)-4.ii, in part, clarifies that if the servicer determines it is appropriate, the servicer need not notify borrowers of specific loss mitigation options, but rather may provide a general statement that loss mitigation options may apply.

The servicer is not required to establish or make good faith efforts to establish live contact with the borrower if the servicer has already established and is maintaining ongoing contact with the borrower under the loss mitigation procedures under § 1024.41.

Small servicers, as defined in Regulation Z, 12 CFR 1026.41(e)(4), are not subject to these requirements. 12 CFR 1024.30(b)(1).

12 CFR 1024.39(a).

12 CFR 1024.39(a); Comment 39(a)-4.i.

12 CFR 1024.39(a); Comment 39(a)-4.ii.

12 CFR 1024.39(a); Comment 39(a)-6.

As discussed below in the section-by-section analysis of § 1024.39(e), the Bureau proposed to add temporary additional early intervention live contact requirements for servicers to provide specific information about forbearances and loss mitigation options during the COVID-19 emergency. The Bureau proposed conforming amendments to § 1024.39(a) and related comments 39(a)-4-i and -ii

to incorporate references to proposed § 1024.39(e).

When amending commentary, the Office of the

Federal Register

requires reprinting of certain subsections being amended in their entirety rather than providing more targeted amendatory instructions and related text. The sections of commentary text included in this document show the language of those sections with the changes as adopted in this final rule. In addition, the Bureau is releasing an unofficial, informal redline to assist industry and other stakeholders in reviewing the changes this final rule makes to the regulatory and commentary text of Regulation X. This redline is posted on the Bureau's website with the final rule. If any conflicts exist between the redline and the text of Regulation X or this final rule, the documents published in the

Federal Register

and the Code of Federal Regulations are the controlling documents.

As discussed in more detail below and in the section-by-section analysis for § 1024.39(e), generally the comments received on proposed § 1024.39(a) supported the changes to § 1024.39(a) and (e). Among those comments, the Bureau received a couple of comments specific to the proposed amendments to § 1024.39(a). A consumer advocate commenter suggested the Bureau should include additional amendments to § 1024.39(a) commentary to further the goals of and properly incorporate proposed § 1024.39(e). The commenter encouraged the Bureau to amend comment 39(a)-3, which addresses good faith efforts to establish live contact, in light of proposed § 1024.39(e). They also encouraged the Bureau to further amend comment 39(a)-4.ii, which clarifies when the servicer must promptly inform a borrower about the availability of loss mitigation options, to address when the written notice required under § 1024.39(b)(2) may be an alternative for live contact during the period § 1024.39(e) is effective. Additionally, an industry commenter discussed how § 1024.39(e) intersects with the guidance provided in existing comment 39(a)-6, indicating that it felt the Bureau should not require § 1024.39(e) under the circumstances described in comment 39(a)-6.

For the reasons discussed below, the Bureau is adopting the amendments to § 1024.39(a) and commentary as proposed, with additional revisions to comments 39(a)-3 and 39(a)-6 to address certain suggestions raised by commenters or points of clarity, and to make certain conforming changes given the revisions to the foreclosure review period in § 1024.41(f)(3). Currently, comment 39(a)-3 clarifies that good faith efforts to establish live contact for purposes of § 1024.39(a) consist of reasonable steps, under the circumstances, to reach a borrower. Those steps may depend on factors, such as the length of the borrower's delinquency, as well as the borrower's failure to respond to a servicer's repeated attempts at communication. The commentary provides examples illustrating these factors, including that good faith efforts to establish live contact with an unresponsive borrower with six or more consecutive missed payments might require no more than including a sentence requesting that the borrower contact the servicer with regard to the delinquencies in the periodic statement or in an electronic communication.

Given the length of forbearance programs during the pandemic, the Bureau is revising comment 39(a)-3 to specify that if a borrower is in a

situation such that the additional live contact information is required under § 1024.39(e) or if a servicer plans to rely on the temporary special COVID-19 loss mitigation procedural safeguards in § 1024.41(f)(3)(ii)(C)(1), servicers doing no more than including a sentence in written or electronic communications encouraging the borrower to establish live contact are not taking reasonable steps under the circumstances to make good faith efforts to establish live contact. When making good faith efforts to establish live contact with borrowers in the circumstances described in § 1024.39(e), generally, reasonable steps to make good faith efforts to establish live contact must include telephoning the borrower on one or more occasion at a valid telephone number, although they can include sending written or electronic communications encouraging the borrower to establish live contact with the servicer, in addition to those telephone calls. While the Bureau believes that it should be apparent that if either § 1024.39(e) or § 1024.41(f)(3)(ii)(C) apply, these unique circumstances present factors that differ from the existing guidance in comment 39(a)-3 such that the example would not apply in those cases, the Bureau is persuaded that the revision is necessary to ensure clarity.

The Bureau also believes this clarification as to good faith efforts is appropriate during the unique circumstances presented by the COVID-19 pandemic emergency. As discussed more fully in part II above, the Bureau estimates that a large number of borrowers will be more than a year behind on their mortgage payments, including those in 18-month forbearance programs, and many will have benefited from temporary foreclosure protections due to various State and Federal foreclosure moratoria. As explained in the proposal, to encourage these borrowers to obtain loss mitigation to prevent avoidable foreclosures and given the length of delinquency during these unique circumstances, the Bureau believes that additional efforts are necessary to reach borrowers at this time. Additionally, for the reasons discussed more fully in the section-by-section analysis of § 1024.41(f)(3)(ii)(C), because compliance with § 1024.39(a) during a certain timeframe is one of several temporary procedural safeguards that servicers may rely on to comply with the temporary special COVID-19 loss mitigation procedural safeguards in § 1024.41(f)(3)(ii)(C), the Bureau has concluded that it must be explicitly clear that servicers are required to do more than provide a sentence encouraging unresponsive borrower contact to prove they have completed the temporary special COVID-19 loss mitigation procedural safeguards. To achieve the goals of § 1024.39(e) discussed in the proposal to Regulation X and the goals of new § 1024.41(f)(3)(ii)(C), in these circumstances presented by the COVID-19 pandemic, good faith efforts to establish live contact require a higher standard of conduct.

For similar reasons, the Bureau is also amending comment 39(a)-6. As identified by a commenter, without revision, current comment 39(a)-6 might be interpreted to allow for a lower standard of ongoing contact than is necessary to assist borrowers in these circumstances. Existing comment 39(a)-6 says, in part, that if the servicer has established and is maintaining ongoing contact with the borrower under the loss mitigation procedures under § 1024.41, the servicer complies with § 1024.39(a) and need not otherwise establish or make good faith efforts to establish live contact. The Bureau is revising this comment to add that if a borrower is in a situation such that the additional live contact information is required under § 1024.39(e) or if a servicer plans to rely on the temporary special COVID-19 loss mitigation procedural safeguards in § 1024.41(f)(3)(ii)(C)(1), then certain loss mitigation related communications alone are not enough for compliance with § 1024.39(a). The Bureau is revising the comment to specify that, in these circumstances, the servicer is not maintaining ongoing contact with the borrower under the loss mitigation procedures under § 1024.41 in a way that would comply with § 1024.39(a) if the servicer has only sent the notices required by § 1024.41(b)(2)(i)(B) and § 1024.41(c)(2)(iii) and has had no further ongoing contact with the borrower concerning the borrower's loss mitigation application.

As discussed above, the Bureau believes this higher standard of conduct, which it notes some servicers are already holding themselves to, is necessary under the current circumstances presented by COVID-19 emergency to help ensure that additional efforts are taken to reach delinquent borrowers, including those that are unresponsive. In line with the goals discussed in the proposal for § 1024.39(e), the Bureau believes this revision will help clarify and ensure that borrowers in these circumstances are receiving ongoing communication about loss mitigation options, whether it be through live contact communications or through completion of a loss mitigation application and reasonable diligence requirements. The Bureau believes this revision will help to prevent instances where borrowers miss opportunities to submit loss mitigation applications because they only receive loss mitigation information at the beginning of their forbearance program, and no other contact until foreclosure is imminent. However, the Bureau is not removing this guidance altogether. As discussed by the commenter and explained in the 2014 RESPA Servicing Proposed Rule

, the Bureau believes when done properly, established and ongoing loss mitigation communication that is maintained can work as well as live contact to encourage and help borrowers file loss mitigation applications earlier in the forbearance program or delinquency, timing which is beneficial to both the servicer and the borrower under the current circumstances.

79 FR 74175, 74199-74200 (Dec. 15, 2014).

The Bureau is not further revising comment 39(a)-4.ii as suggested by a consumer advocate commenter. Comment 39(a)-4.ii provides, in part, that, if appropriate, a servicer may satisfy the requirement in § 1024.39(a) to inform a borrower about loss mitigation options by providing the written notice required by § 1024.39(b)(1), but the servicer must provide such notice promptly after the servicer establishes live contact. The existing requirement in § 1024.39(a) to inform a borrower about the availability of loss mitigation options that this comment references is separate from the new information requirements in § 1024.39(e). Nothing in the existing rule would prevent compliance with both the option to inform these borrowers about the availability of loss mitigation options as provided in comment 39(a)-4.ii and the requirement to provide these borrowers the specified additional information in § 1024.39(e) promptly after establishing live contact.

39(e) Temporary COVID-19-Related Live Contact

As discussed more fully above in the section-by-section analysis of § 1024.39(a), currently, a servicer must make good faith efforts to establish live contact with delinquent borrowers no later than the borrower's 36th day of delinquency and again no later than 36 days after each payment due date so long as the borrower remains delinquent.

Promptly after establishing live contact, the servicer

must inform the borrower about the availability of loss mitigation options, if appropriate.

Small servicers, as defined in Regulation Z, 12 CFR 1026.41(e)(4), are not subject to these requirements. 12 CFR 1024.30(b)(1).

12 CFR 1024.39(a).

The Bureau's Proposal

The Bureau proposed to add § 1024.39(e) to require temporary additional actions in certain circumstances when a servicer establishes live contact with a borrower during the COVID-19 emergency. These temporary requirements would have applied for one year after the effective date of the final rule. In general, proposed § 1024.39(e)(1) would have required servicers to ask whether borrowers not yet in a forbearance program at the time of the live contact were experiencing a COVID-19-related hardship and, if so, to list and briefly describe available forbearance programs to those borrowers and the actions a borrower must take to be evaluated. In general, for borrowers in forbearance programs at the time of live contact, proposed § 1024.39(e)(2) would have required servicers to provide specific information about the borrower's current forbearance program and list and briefly describe available post-forbearance loss mitigation options and the actions a borrower would need to take to be evaluated for such options during the last required live contact made before the end of the forbearance period. For the reasons discussed below, the Bureau is finalizing § 1024.39(e) generally as proposed, with some revisions to address certain comments received, including revisions to the sunset date of this provision, adding a requirement to provide certain housing counselor information, revising the requirement that the servicer ask the borrower to assert a COVID-19-related hardship, and revising the applicable time period when the servicer must provide the additional information to borrowers who are in a forbearance program.

Comments Received

In response to proposed § 1024.39(e), the Bureau received comments from trade associations, financial institutions, consumer advocate commenters, government entities, and individuals. Some commenters opposed the provision entirely. A few industry commenters asserted the proposal was unnecessary, stating that servicers were already performing the proposed requirements and the proposal duplicated most GSE and FHA requirements. Additionally, a few industry commenters asserted that, instead of adding § 1024.39(e), the Bureau should rely on existing § 1024.39(a) requirements and provide COVID-19-specific examples in the commentary to explain how those provisions apply under the current circumstances.

However, in general, a majority of commenters that addressed proposed § 1024.39(e) supported the proposed amendments. Some industry commenters provided general support. Other commenters, industry and otherwise, supported proposed § 1024.39(e) but requested certain revisions. Below is a discussion of comments received on the overall proposed requirements in § 1024.39(e). See the section-by-section analyses of § 1024.39(e)(1) and (2) for a discussion of comments received relating to each of those specific proposed provisions.

Concerns about balancing borrower access to information and servicer discretion.

Several commenters discussed how proposed § 1024.39(e) would affect the balance between borrower access to information as they make loss mitigation decisions and servicer discretion in how to facilitate borrower understanding and prevent confusion. Several industry commenters and trade groups expressed the desire that the Bureau continue to provide servicers with discretion as to which forbearance options and other loss mitigation options are listed and described to borrowers promptly after live contact is established, even as it applies to the information required under § 1024.39(e). The commenters expressed concern that if servicers provided information about all available forbearance options or other loss mitigation options, it may be overwhelming. Additionally, those commenters indicated that providing information about all available forbearance options and loss mitigation options may cause borrower frustration during the loss mitigation application process. For example, commenters asserted that, while certain loss mitigation options may be available, review processes, such as investor “waterfall” requirements, may mean not all available options are offered to the borrower. Further, the commenters indicated eligibility and availability of forbearance options and other loss mitigation options may change after the live contact, particularly if the borrower is on the cusp of certain criteria, such as delinquency length, at the time of the live contact.

In contrast, several consumer advocate commenters and an industry commenter indicated that borrowers would benefit from receiving a list and brief description of all available forbearance options and other loss mitigation options during early intervention and requested that the Bureau require additional information in some cases. For example, a couple of commenters asserted that, not only should servicers be required to provide all forbearance and loss mitigation options available to the borrower, they should also be required to provide all possible forbearance and loss mitigation options, regardless of availability to the borrower. The commenters that supported requiring servicers to provide all available forbearance options and other loss mitigation options during early intervention cited concerns that servicer staff may not be properly trained to accurately identify which loss mitigation options are appropriate for the borrower, and provided qualitative evidence of servicer staff providing inaccurate forbearance and other loss mitigation information. These commenters also indicated that unless borrowers receive information about all available loss mitigation options, if not all loss mitigation options, they may not have all necessary information to determine and advocate for the best loss mitigation solution for their particular situation.

Both sets of comments reiterate concerns discussed in the section-by-section analysis of proposed § 1024.39(e). The Bureau is aware of evidence supporting assertions that some servicers are providing consistent and accurate information, but also evidence that some borrowers are not receiving consistent and accurate information as they seek loss mitigation assistance during the pandemic.

The Bureau is not persuaded that providing the borrower with information on all possible loss mitigation options, regardless of whether those options are available to the borrower, is beneficial. The Bureau agrees that it is essential at this time to provide the borrower with as much loss mitigation information as possible to support borrowers in their decisions as to how to address their delinquency in a way that is best for their situation. Nevertheless, the Bureau believes providing all possible loss mitigation options, even those that are not applicable to the borrower, would increase borrower confusion.

86 FR 18840 at 18851 (Apr. 9, 2021).

However, the Bureau is also not persuaded that allowing complete servicer discretion as to which, if any, specific loss mitigation options are discussed is sufficient in the current crisis. The concerns about servicers sometimes providing inconsistent and inaccurate information during this

critical period for loss mitigation assistance seem only more likely to continue or increase as the expected volume of borrowers needing the assistance increases. Further, the anticipated forthcoming expiration of many COVID-19-related programs may also contribute to these concerns, as fast-paced or frequent changes in loss mitigation program availability or criteria have been noted to cause some consistency and accuracy issues with some servicers. For these reasons, the Bureau concludes that the information required under final § 1024.39(e)(1) and (2), as discussed in more detail in the section-by-section analyses of those provisions below, strikes the correct balance during of the pandemic.

Require information in a written disclosure.

Certain consumer advocate commenters, industry commenters, and State government commenters requested the Bureau consider requiring new written disclosures as part of the proposed early intervention amendments. A consumer advocate commenter and a State government group suggested the Bureau require the additional content in proposed § 1024.39(e) to be provided in a written notice or added to the existing 45-day written notice requirements in § 1024.39(b). An industry group and a State government group suggested that the Bureau add written pre-foreclosure notice requirements, similar to those in New York, Iowa, and Washington.

The Bureau is not finalizing any new written disclosures or amendments to existing written disclosure requirements. Given the expedited timeframe and urgent necessity for this rulemaking, there is not sufficient time to complete consumer testing to help ensure any new or updated required disclosures would sufficiently assist borrowers, rather than contributing to any confusion. Additionally, the Bureau believes adding new written disclosure requirements at this time could be harmful to borrowers during the unique circumstances presented by the COVID-19 emergency, as servicers would need to spend time and resources implementing those disclosures, rather than focusing their time and resources on assisting borrowers quickly. Given the upcoming expected surge in borrowers exiting forbearance, the Bureau believes those resources are better spent assisting borrowers. The Bureau notes that nothing in the rule prevents servicers from listing and briefly describing specific loss mitigation options available to the borrower in the existing 45-day written notice or from adding any additional information to the notice.

In addition, the rule does not prevent a servicer from following-up on its live contact with specific information in a written communication.

Comment 39(b)(1)-1 states, in part, that a servicer may provide additional information that the servicer determines would be helpful.

For example, comment 39(a)-4.ii states, in part, that a servicer may inform borrowers about the availability of loss mitigation options orally, in writing, or through electronic communication promptly after the servicer establishes live contact.

Require provision of HUD homeownership counselors or counseling organizations list.

Several consumer advocate commenters and State Attorneys General commenters suggested the Bureau should require servicers to provide information to borrowers about the Department of Housing and Urban Development (HUD) homeownership counseling as part of the additional information required by proposed § 1024.39(e). Commenters stated that homeownership counselors are often able to assist borrowers that mistrust their servicer, or have difficulty understanding their options or how to submit a loss mitigation application.

The Bureau is persuaded that some borrowers may benefit from homeownership counselor assistance during the pandemic. However, given commenter concerns about the amount of information required by § 1024.39(e) that servicers must convey promptly after establishing a live contact, the Bureau does not believe provision of detailed homeownership counselor contact information during the live contact would be beneficial to borrowers in these circumstances. Instead, the Bureau is persuaded that borrowers may benefit from a reference to where they can access homeownership counselor contact information. Thus, as discussed more fully in the section-by-section analyses of § 1024.39(e)(1) and (2), the Bureau is adding a requirement that the servicer must identify at least one way that the borrower can find contact information for homeownership counseling services, such as referencing the borrower's periodic statement. Other examples servicers may choose to reference include, for example, the Bureau's website, HUD's website, or the 45-day written notice required by § 1024.39(b), but the servicer need only include one reference. By requiring that servicers identify at least one way that the borrower can find contact information for homeownership counseling services, the Bureau believes it will remind borrowers, especially those who believe they would benefit from homeownership counselor assistance, of where this information is located and how they may access it. Additionally, this requirement may help address concerns about servicer resource capacity, as discussed in the proposal, given that homeownership counselors can help answer borrower's questions regarding their loss mitigation options. The Bureau notes that servicers are already required to provide certain information about homeownership counseling to borrowers,

and that servicers may comply with this provision by referencing existing disclosures, further minimizing servicer burden.

See, e.g.,

12 CFR 1026.41(d)(7)(v).

Exempt federally backed mortgages.

One industry trade group requested the Bureau exempt “federally backed” mortgage loans from proposed § 1024.39(e). The commenter indicated that these mortgages are already subject to Federal investor or other Federal guarantor requirements that are similar to or more extensive than those proposed.

The Bureau is not persuaded that exempting federally backed mortgages from the § 1024.39(e) requirements is necessary. The Bureau believes final § 1024.39(e) does not conflict with GSE or FHA requirements and does not add additional burdens on servicers of those loans. Further, the Bureau also believes exempting federally backed mortgages from this provision may add unnecessary implementation complexity that may affect the ability of servicers to provide critical assistance to borrowers at this time.

Require translation for limited English proficiency borrowers.

A consumer advocate commenter and a State Attorney General commenter advocated for adding a translation requirement to proposed § 1024.39(e) to assist limited English proficiency borrowers. The Bureau is not revising § 1024.39(e) to require translation for limited English proficiency borrowers. In the interest of issuing the final rule on an expedited basis to bring relief as soon as possible to the largest number of borrowers, the Bureau did not undertake to incorporate a requirement to provide disclosures in languages other than English or to incorporate model forms in other languages. This does not mean the Bureau will or will not take that step in a future rulemaking. Additionally, Regulation X permits servicers to provide disclosures in languages other than English.

The Bureau both permits and encourages servicers to ascertain the language preference of their borrowers, when done in a legal manner

and without violating the Equal Credit Opportunity Act or Regulation B, to be responsive to borrower needs during this critical time for borrower communication.

The Bureau will be providing on its website a Spanish language translation of Appendix MS-4 of Regulation X that servicers may use, as permitted by applicable law.

See

12 CFR 1024.32(a)(2).

See

Bureau of Fin. Prot.,

Statement Regarding the Provision of Financial Products and Services to Consumers with Limited English Proficiency

(Jan. 13, 2021),

https://www.consumerfinance.gov/rules-policy/notice-opportunities-comment/open-notices/statement-regarding-the-provision-of-financial-products-and-services-to-consumers-with-limited-english-proficiency/;

86 FR 6306 (Jan. 13, 2021).

See also

82 FR 55810 (Nov. 20, 2017).

Electronic media use for live contacts.

A consumer advocate commenter and State Attorney General commenter requested the Bureau provide guidance about which electronic communication media satisfy the live contact requirements. The Bureau has previously declined to require or explicitly permit certain methods of electronic media for required communications under the mortgage servicing rules, stating it believes it would be most effective to address the use of such media after further study and outreach to enable the Bureau to develop principles or standards that would be appropriate on an industry-wide basis.

Similarly now, the Bureau is not finalizing language in the rule to discuss specific electronic media use for early intervention live contact requirements, but notes that certain electronic media, such as live chat functions, can, in certain circumstances, be compared to telephone or in-person conversations that are permitted as live contact under the rule.

See, e.g.,

78 FR 10695, 10745 (Feb. 14, 2013) (discussing the suggestion to require establishing electronic portals for intake of notices of error under § 1024.35(c)).

Sunset date.

A few commenters discussed the sunset date for proposed § 1024.39(e). These commenters generally supported having a sunset date. However, they differed about whether the proposed August 31, 2022 sunset date was the appropriate choice. A government commenter and an industry commenter supported the existing sunset date, suggesting it was long enough, with one indicating it should not be shortened. Conversely, another industry commenter asserted the proposed sunset date conflicted with certain existing GSE requirements and requested the sunset date correlate with the emergency declaration or COVID-19-related forbearance program end dates. The Bureau also received a suggestion during its interagency consultation process to revise the sunset date to June 30, 2022, the anticipated end date of certain Federal COVID-19-related forbearance programs.

The Bureau is persuaded a sunset date for § 1024.39(e) is appropriate and provides servicers with certainty as to how long they are required to provide the additional information during live contacts. However, the Bureau is revising the sunset date to better align with the pandemic, rather than the effective date of this final rule. The Bureau is persuaded that aligning the sunset of § 1024.39(e) more closely to the pandemic is necessary to prevent conflicts between § 1024.39(e) and pandemic-related investor or guarantor requirements, such as those related to additional communications and loss mitigation options.

As such, § 1024.39(e) will sunset on October 1, 2022. The Bureau anticipates that COVID-19-related forbearance programs will be offered through at least September 30, 2021, and anticipates that most borrowers utilizing the full 360 days offered under the CARES Act will exit forbearance by September 30, 2022. Once COVID-19-related forbearance programs expire and borrowers exit the applicable forbearance programs, the circumstances that warranted the additional information in § 1024.39(e) will no longer apply. The Bureau anticipates that will occur sometime after September 30, 2022, but there is significant uncertainty about exactly when such programs will expire. Taking that uncertainty into consideration, to best ensure a sufficient period of coverage, the Bureau concludes that it is appropriate to extend the proposed sunset date. The Bureau notes that the final sunset date will align with the mandatory compliance date for the final rule titled Qualified Mortgage Definition under the Truth in Lending Act (Regulation Z): General QM Loan Definition (General QM Final Rule). The Bureau recently extended, that mandatory compliance date, in part, to preserve flexibility for consumers affected by the COVID-19 pandemic and its economic effects. As similarly noted in that rule, the Bureau will continue to monitor for any unanticipated effects of the COVID-19 pandemic on market conditions to determine if future changes are warranted.

While commenters suggested the Bureau could tie the sunset date to the end of these loss mitigation programs, the Bureau believes that, because investors and guarantors may differ as to when their respective pandemic-related requirements will expire, it will simplify compliance for the requirements to sunset on a universal date. The Bureau believes this change to the sunset date will address comments indicating the proposed date conflicted with guidance from other agencies. Additionally, the Bureau believes this change will address commenter concerns that the provision should sunset with the circumstances of the pandemic. Further, the Bureau believes this time period is necessary to allow servicers to reach most borrowers. While, as discussed above in part II, the anticipated surge and largest amount of strain on servicer resources is expect to begin to decline after January 1, 2022, the volume of borrowers expected to exit forbearance each month will remain high beyond that date and the unique circumstances of the pandemic, including the unusually long delinquencies, will persist. The Bureau concludes the sunset date for § 1024.39(e) must cover both the expiration of COVID-19-related forbearance programs, which would be relevant for the requirements for § 1024.39(e)(1), and also borrowers exiting COVID-19-related forbearance programs who entered on the last possible day and utilized a full 12 months of forbearance, which would be relevant for the requirements in § 1024.39(e)(2). To cover both groups of borrowers, and particularly to reach all borrowers exiting the relevant forbearance programs discussed in § 1024.39(e), the Bureau believes it is necessary to extend this provision beyond the anticipated surge of borrowers existing forbearance, unlike other provisions in this rule.

Final Rule

As discussed in more detail in the section-by-section analyses of § 1024.39(e)(1) and (2) below, the Bureau is finalizing § 1024.39(e) generally as proposed, with some revisions to address certain comments received, including revisions to the sunset date of this provision, adding a requirement to provide certain homeownership counseling information, revising the requirement that the servicer ask the borrower to assert a COVID-19-related hardship, and revising the applicable time period when the servicer must provide the additional information to borrowers who are in a forbearance program. The Bureau believes the addition of § 1024.39(e) will help encourage and support borrowers in seeking available loss mitigation assistance during this unprecedented time. Section 1024.39(e) temporarily requires servicers to provide specific additional information to certain delinquent borrowers promptly after establishing live contact.

As revised, the requirements apply until October 1, 2022.

The Bureau notes that this final rule does not change the scope of any current live contact requirements more generally under § 1024.39(a). Thus, the Bureau reiterates that § 1024.39(e) does not apply if the borrower is current. The Bureau also notes that nothing in the rule prevents a servicer from providing additional information than what is required under the rule to borrowers about forbearance programs or other loss mitigation programs. For example, if the forbearance program may end soon after the live contact is established, has certain eligibility criteria, or is subject to investor “waterfall” review procedures, a servicer may choose to discuss that information with the borrower to attempt to prevent confusion.

Additionally, both § 1024.39(e)(1) and (2) require servicers to provide a list of forbearance programs or loss mitigation programs made available by the owner or assignee of the borrower's mortgage loan to borrowers experiencing a COVID-19-related hardship. The list of forbearance programs is limited to only those that are available at the time the live contact is established. The Bureau has added language to both sections to clarify this timing limitation. If a forbearance program or loss mitigation program is no longer available at the time of the live contact, the servicer need not include that forbearance program or loss mitigation program in the list.

If a borrower's COVID-19-related hardship would not meet applicable eligibility criteria for a forbearance program or a loss mitigation program, the servicer also need not include that in the lists required by § 1024.39(e)(1) or (2). However, the Bureau reiterates that the required information under § 1024.39(e) is not limited to forbearance programs or loss mitigation programs specific to COVID-19 or only available during the COVID-19 emergency. The servicer must provide information about COVID-19-specific programs, as well as any generally available programs where COVID-19-related hardships are sufficient to meet the hardship-related requirements for the program. Further, the servicer must inform the borrower about program options made available by the owner or assignee of the borrower's mortgage loan regardless of whether the option is available based on a complete loss mitigation application, an incomplete application, or no application, to the extent permitted by this rule. Finally, the existing rule provides guidance as to what constitutes a brief description and the steps the borrower must take to be evaluated for loss mitigation options.

12 CFR 1024.38(b)(2); 12 CFR 1024.40(b)(1)(i) and (ii).

39(e)(1)

The Bureau's Proposal

Proposed § 1024.39(e)(1) would have temporarily required servicers to take certain actions promptly after establishing live contact with borrowers who are not currently in a forbearance program where the owner or assignee of the borrower's mortgage loan makes a payment forbearance program available to borrowers experiencing a COVID-19-related hardship. In those circumstances, proposed § 1024.39(e)(1) would have required that the servicer ask if the borrower is experiencing a COVID-19-related hardship. If the borrower indicated they were experiencing a COVID-19-related hardship, proposed § 1024.39(e)(1) would have required the servicer to provide the borrower a list and description of forbearance programs available to borrowers experiencing COVID-19-related hardships and the actions the borrower would need to take to be evaluated for such forbearance programs. For the reasons discussed below, the Bureau is finalizing § 1024.39(e)(1) generally as proposed, with some revisions to address certain comments received, including removing the requirement that the servicer ask whether the borrower is experiencing a COVID-19-related hardship, and adding a requirement to provide certain housing counselor information.

Comments Received

Commenters generally supported proposed § 1024.39(e)(1). One industry commenter opposed this provision overall, asserting servicers were already performing the requirements proposed in § 1024.39(e)(1) and that adding new regulatory requirements at this time will further strain servicer capacity. Of those that supported the proposal, commenters generally suggested certain scope and content revisions, discussed below.

Scope.

Several commenters discussed which borrowers would benefit from proposed § 1024.39(e)(1) requirements. A consumer advocate commenter and an individual supported the proposed requirement that the servicer ask the borrower to assert a COVID-19-related hardship. A consumer advocate commenter suggested that the requirements should instead apply to all delinquent borrowers not yet in forbearance, not just those that assert a COVID-19-related hardship. This comment asserted that requiring § 1024.39(e)(1) information for all such delinquent borrowers removes the onus from borrowers to identify whether their hardship qualifies as COVID-19-related. A few industry commenters asserted that servicers should have discretion to determine whether the borrower has a COVID-19-related hardship, rather than asking the borrower. Further, as discussed above in the section-by-section analysis for the definition of COVID-19-Related Hardship in § 1024.31, commenters expressed concern about servicer and borrower understanding of the term and ability to accurately implement its use.

The Bureau is persuaded it should remove the requirement that servicers ask borrowers whether they are experiencing a COVID-19-related hardship, and instead require servicers to provide certain information under § 1024.39(e)(1) to delinquent borrowers during the period the provision is effective unless the borrower asserts they are not interested. The Bureau indicated in the proposal that it was considering expanding this provision to all delinquent borrowers not in forbearance at the time live contact is established. As mentioned by commenters and in the proposal, borrowers may not know or may be more hesitant to assert that their hardship qualifies as a COVID-19-related hardship. This seems particularly applicable to the borrowers that have not yet obtained forbearance assistance. As discussed in the proposal, the Bureau believes these borrowers may not yet have taken advantage of the offered forbearance programs because they may be more hesitant to assert hardship, may not fully trust their ability to receive assistance, or may not understand whether their hardship is COVID-19-related. By removing the requirement that borrowers take action to receive the information, and instead requiring that borrowers take action to be excluded, the rule helps to ensure that borrowers are not missing beneficial information due to any misunderstanding or hesitancy, reducing the likelihood that target borrowers may miss this important information.

However, the Bureau is also persuaded by commenters that some delinquent borrowers may not benefit from receipt of this information. Thus, the final rule continues to provide a method for borrower-initiated exclusion. Unlike the proposal, the final rule will require borrowers to state that they are uninterested in receiving information about the available forbearance programs. In doing so, the

Bureau continues to narrow the applicability of the provision to those borrowers most likely to be experiencing a COVID-19-related hardship, without requiring borrowers who are uncertain or hesitant to opt-in to receiving this information. The Bureau believes borrowers who are certain they do not have a COVID-19-related hardship are likely to assert they do not need the additional information in § 1024.39(e)(1). Borrowers that are certain they have a COVID-19-related hardship or are unsure will likely not take such action, unless they are uninterested forbearance program assistance. For those borrowers that are unsure, the Bureau believes that receiving this information likely will clarify whether their hardship qualifies as COVID-19-related and will be beneficial even if ultimately the borrower does not meet the required hardship criteria. Further, the Bureau does not believe that requiring an assertion to be excluded, rather than an assertion to be included, is likely to increase the probability of borrower confusion. As with the proposal, the information seems equally likely to be received by only those borrowers that may have a COVID-19-related hardship.

Content.

A few consumer advocate commenters indicated the Bureau should expand § 1024.39(e)(1) to require servicers to inform the borrower of all possible or available loss mitigation options, not just the available forbearance options. The commenters assert that while forbearance may be beneficial for some borrowers, some delinquent borrowers may have stabilized their income and may be ready for more permanent loss mitigation options. The commenters also assert, as discussed above in the section-by-section analysis for § 1024.39(e), that borrowers may benefit from the knowledge of all possible loss mitigation options, rather than those options only available to them.

The Bureau is not persuaded that the current unique circumstances presented by the COVID-19 emergency warrant requiring servicers to inform delinquent borrowers who are not yet in a forbearance program about all possible or available loss mitigation options. First, the Bureau is not persuaded that it would be beneficial to expand the content discussed to include options beyond forbearance programs. The Bureau believes that forbearance programs at this time are beneficial to delinquent borrowers, given they can provide borrowers with additional time to recover from their hardships, develop a financial plan, and apply for permanent loss mitigation. Additionally, limiting the required information to just forbearance options first can help prevent borrowers not yet in forbearance from becoming overwhelmed with information, a concern noted by commenters as discussed above. Further, the content required by § 1024.39(e)(1) does not replace the existing live contact requirements in § 1024.39(a), which require that, promptly after establishing live contact with a borrower, the servicer must inform the borrower about the availability of loss mitigation options, if appropriate. Thus, in some cases, it may be appropriate for servicers to inform certain borrowers, such as those who indicate that they have resolved their hardship, about the availability of additional loss mitigation options in addition to the information required in § 1024.39(e)(1). Second, the Bureau is not persuaded that the options discussed should be all possible options, whether or not available to the borrower through the owner or assignee of the mortgage. The potential for increased borrower confusion or frustration outweighs any potential benefit this knowledge may provide the borrower.

Final Rule

For the reasons discussed in this section and in more detail below, the Bureau is finalizing § 1024.39(e)(1) generally as proposed with some revisions to address certain comments received. The Bureau believes § 1024.39(e)(1), as revised, will help encourage borrowers not yet in forbearance to work with their servicer under these unique circumstances and avoid unnecessary foreclosures.

For the reasons discussed above, the Bureau is revising § 1024.39(e)(1) to remove the requirement that servicers ask borrowers whether they are experiencing a COVID-19-related hardship before being providing the additional forbearance program information. Instead, the Bureau is finalizing § 1024.39(e)(1) such that all delinquent borrowers not yet in forbearance at the time live contact is established will receive notification that forbearance programs are available by the owner or assignee of the borrowers' mortgage loan to borrowers experiencing COVID-19-related hardships. To provide this information, the servicer need not use the exact language in the regulation, and may find a more plain-language method, such as informing the borrower that there are forbearance programs available if they are having difficulty making their payments because of COVID-19. Unless the borrower states they are not interested, servicers are then required to provide a list and brief description of such forbearance programs, as well as the actions the borrower must take to be evaluated for such forbearance programs. In addition to the guidance discussed above in the section-by-section analysis for § 1024.39(e) more generally, the Bureau notes that particular to § 1024.39(e)(1), the forbearance programs that servicers must identify also include more than just short-term forbearance programs as defined in the mortgage servicing rules.

Additionally, as discussed above, the Bureau is also requiring servicers to identify at least one way that the borrower can find contact information for homeownership counseling services, such as referencing the borrower's periodic statement.

Existing § 1024.41(c)(2)(iii) and comment 41(c)(2)(iii)-1 define short-term payment forbearance program as a payment forbearance program that allows the forbearance of payments due over periods of no more than six months.

39(e)(2)

The Bureau's Proposal

Proposed § 1024.39(e)(2) would have temporarily required a servicer to provide certain information promptly after establishing live contact with borrowers currently in a forbearance program made available to those experiencing a COVID-19-related hardship. First, it would have required the servicer to provide the borrower with the date the borrower's current forbearance program ends. Second, it would have required the servicer to provide a list and brief description of each of the types of forbearance extensions, repayment options and other loss mitigation options made available by the owner or assignee of the borrower's mortgage loan to resolve the borrower's delinquency at the end of the forbearance program. It also would have required the servicer to inform the borrower of the actions the borrower must take to be evaluated for such loss mitigation options. Proposed § 1024.39(e)(2) would have required the servicer to provide the borrower with this additional information during the last live contact made pursuant to existing § 1024.39(a) that occurs before the end of the loan's forbearance period. For the reasons discussed below, the Bureau is finalizing § 1024.39(e)(2) generally as proposed, with some revisions to address certain comments received, including revising the timing for when this information is provided, and adding a requirement to provide certain housing counselor information.

Comments Received

Commenters generally supported proposed § 1024.39(e)(2). One industry commenter opposed this provision overall, asserting servicers were already performing the requirements proposed in § 1024.39(e)(2), and that adding new regulatory requirements at this time will further strain servicer capacity. Of those that supported the proposal, commenters generally suggested certain scope, content, and timing revisions, discussed below.

Scope.

A few commenters discussed the scope of § 1024.39(e)(2). One individual commenter suggested the requirements in § 1024.39(e)(2) should apply to all delinquent borrowers during the time period, rather than just those in forbearance programs made available to borrowers experiencing a COVID-19-related hardship at the time of the live contact. A couple of industry commenters suggested the Bureau should exempt borrowers that voluntarily exit the forbearance program early.

The Bureau is not persuaded that the current pandemic warrants expanding the scope of § 1024.39(e)(2) to all delinquent borrowers. Delinquent borrowers not yet in forbearance will receive additional information under this final rule, as provided in § 1024.39(e)(1). As discussed above, the Bureau is persuaded that providing such borrowers with forbearance information first provides additional time for borrowers to then seek loss mitigation assistance and develop a financial plan. Further, the Bureau notes that the requirements in § 1024.39(e) are in addition to the existing requirement in § 1024.39(a). Thus, even if a delinquent borrower is not in forbearance at the time live contact is established, if appropriate, a servicer is already required to inform the borrower about the availability of loss mitigation options.

The Bureau is also not persuaded that an exemption from § 1024.39(e)(2) is necessary for borrowers that exit forbearance programs early. First, § 1024.39(e)(2), and § 1024.39(a) more broadly, only apply to delinquent borrowers. It seems likely that if a borrower is voluntarily exiting forbearance early, it is because the borrower has the ability to bring the account current and the hardship has ended. If the borrower was current at the time the forbearance was scheduled to end, § 1024.39(e)(2), as revised, would not apply because § 1024.39(a) would not apply. If, however, a borrower exited forbearance early but remained delinquent, the Bureau believes that borrower would still benefit from the loss mitigation information required by § 1024.39(e)(2) and thus, it should still apply.

Content.

Several consumer advocate commenters requested the Bureau require servicers to provide information to borrowers about all possible loss mitigation options, not just those that are available. These commenters supported the Bureau in limiting servicer discretion. Some indicated borrowers benefit from receiving information about all possible loss mitigation options, even if not applicable, because it allows borrowers to better identify mistakes in information they receive. The commenters also asserted that available loss mitigation options should include those that the borrower is eligible for even if the investor “waterfall” requirements may prevent the borrower from being offered a particular option. Conversely, feedback during an interagency consultation and a few industry commenters expressed concern about requiring servicers to provide all loss mitigation options available to the borrower. These commenters cited concerns about borrower confusion. They indicated that providing options that may not be available after review of the loss mitigation application due to investor “waterfall” requirements and changes in borrower eligibility after the live contact may confuse borrowers or make them believe they were provided with inaccurate information. Some of these commenters requested that the Bureau give servicers discretion to determine which loss mitigation options are appropriate for discussion, rather than listing all available loss mitigation options, or allow generalized statements that loss mitigation options are available.

As discussed in the proposed rule and above in the section-by-section analysis for § 1024.39(e), the Bureau believes that information about specific loss mitigation options is crucial for borrowers at this time. Additionally, the Bureau believes that providing all borrowers exiting forbearance with consistent information about loss mitigation options made available by the owner or assignee of their mortgage loan will address concerns about consistency and accuracy with respect to pandemic-related loss mitigation information.

As discussed above, the Bureau is not persuaded it should expand the information provided to include all possible loss mitigation options or that it should allow servicers to exercise discretion about what information to share. As stated above, the Bureau is persuaded by the comments that the proposed approach appropriately balances providing the borrower transparency as to which loss mitigation options the borrower may reasonably expect to potentially be reviewed for, with the need to prevent borrower confusion. Because the options provided are only those that might be available to the borrower, rather than all options that the owner or assignee makes available to any borrowers, the Bureau believes this will sufficiently tailor the information to the borrower's particular situation. Additionally, because the rule requires only a brief description, as discussed further below, rather than a full review of the loss mitigation program, there will not be an overwhelming amount of information provided.

With regard to concerns about investor waterfall requirements, the Bureau is not persuaded these concerns and the potential implications on borrower understanding justify eliminating the potential benefit of the provision of information about all of the types of forbearance extension, repayment options, and other loss mitigation options made available to the borrower by the owner or assignee of the borrower's mortgage loan at the time of the live contact. However, as noted above, if a servicer believes that a borrower may be confused by the investor's waterfall requirements and the impact they may have on the loss mitigation options offered to the borrower, nothing in the rule would prevent a servicer from providing additional information to assist the borrower in understanding how an evaluation “waterfall” may affect the loss mitigation options for which a borrower is reviewed and ultimately offered. The Bureau encourages this type of transparency in communications.

“Last live contact” timing.

Several commenters discussed the proposed requirement that servicers convey the information required by § 1024.39(e)(2) during the last live contact made pursuant to existing § 1024.39(a) that occurs before the end of the loan's forbearance program. These commenters supported proposed § 1024.39(e)(2) overall but suggested different timing than the “last live contact.” Several industry commenters suggested the Bureau require servicers to provide the information during the last live contact that is no later than 30 days before the scheduled end of the forbearance program, ensuring the information is not provided on the last day of the forbearance program and noting that the scheduled end date provides more

certainty for servicers. One industry commenter indicated that the last live contact is too late, and that the information should be provided earlier in the forbearance program. A few consumer advocate commenters suggested the Bureau should require that the contact occur 45 days before the end of forbearance. Further, some commenters suggested the last live contact should be tied to the scheduled end of forbearance programs, not the actual end date, citing that consumers may voluntarily leave programs early or may extend their forbearance program, effectively changing the actual end date.

Additionally, a few commenters suggested that the information required under proposed § 1024.39(e)(2) should be provided in more than one live contact. A few consumer advocate commenters suggested the information be provided during all live contacts established during the forbearance program. One consumer advocate suggested the information be provided during the live contact established at the start of the forbearance program, in addition to the last live contact. One State Attorney General commenter suggested the information be provided during the live contact that is established immediately after final rule issuance, as well as the last live contact.

The Bureau is persuaded by the comments that it should revise § 1024.39(e)(2) to clarify when servicers must provide the information required by § 1024.39(e)(2). First, the Bureau agrees with commenters that the timing should be tied to the scheduled end of the forbearance program, rather than the actual end date. As discussed above, the Bureau recognizes that some borrowers may extend their forbearance programs and others may voluntarily exit before the scheduled end date. The Bureau concludes that providing this information based on the scheduled end date is beneficial for borrowers that extend their forbearance program, so that they will receive this information each time they extend their forbearance program.

Second, the Bureau declines to require servicers to provide the information required by § 1024.39(e)(2) to borrowers earlier in the forbearance program or more than one time. As discussed in the proposal, the Bureau believes providing this information towards the end of forbearance programs better aligns with current borrower behavior patterns, given economic uncertainty and the impact foreclosure moratoria may have their sense of urgency, potentially increasing the effectiveness of the messaging.

In addition, the Bureau is concerned that requiring this information too early before the scheduled end date of the forbearance program may not align with existing investor requirements, a timing misalignment which may require duplicated efforts by servicers to contact with borrowers, burdening servicers and potentially confusing borrowers. However, the Bureau agrees that the servicer should provide this information before the final day of the borrower's forbearance program. The Bureau does not believe it is necessary to require this information under § 1024.39(e)(2) in additional instances, such as at the beginning of forbearance programs or during the live contact established immediately after the effective date of this final rule. Most borrowers have already started the relevant forbearance programs, and for those yet to begin forbearance programs, servicers are already required under the servicing rules to provide a written notice to borrowers promptly after offering a borrower a short-term payment forbearance program based on the evaluation of an incomplete application.

Additionally, the Bureau is concerned that requiring servicers to provide the additional information at the effective date for all accounts would overwhelm servicer capacity at a critical moment.

86 FR 18840, 18849-18850 (Apr. 9, 2021).

12 CFR 1024.41(c)(2)(iii) requires servicers promptly after offering a short-term payment forbearance program to provide borrowers with a written notice stating the specific payment terms and duration of the program, that the servicer offered the program based on an evaluation of an incomplete application, that other loss mitigation options may be available, and the borrower has the option to submit a complete loss mitigation application to receive an evaluation for all loss mitigation options available to the borrower regardless of whether the borrower accepts the program or plan. This requirement applies with respect to every such short-term payment forbearance program offered, including each successive program renewal or extension.

See, e.g.,

78 FR 60381, 60401 (Oct. 1, 2013) (noting that the rule does not preclude a servicer from offering multiple successive short-term payment forbearance programs).

Thus, to balance the timing considerations, the Bureau is revising § 1024.39(e)(2) to clarify that servicers must provide the additional information during the live contact that occurs at least 10 days and no more than 45 days before the scheduled end of the forbearance program. The Bureau recognizes that this approach may mean that certain borrowers exiting forbearance near the effective date of this final rule could be missed. As a result, the Bureau is amending this provision to require servicers to provide the additional information during the first live contact made pursuant to § 1024.39(a) after August 31, 2021, if the scheduled end date of the forbearance program occurs between August 31, 2021 and September 10, 2021. Additionally, see part VI for discussion of voluntary early compliance.

Final Rule

For the reasons discussed in this section and in more detail below, the Bureau is finalizing § 1024.39(e)(2) generally as proposed, with some revisions to address certain comments received. As revised, the Bureau concludes that § 1024.39(e)(2) will help further the Bureau's goal to encourage borrowers to begin application for loss mitigation assistance before the end of the forbearance program.

As discussed above, the Bureau is revising § 1024.39(e)(2) to require that at least 10 and no more than 45 days before the scheduled end date of their current forbearance program, the servicer must provide the borrower a list and brief description of each of the types of forbearance extension, repayment options, and other loss mitigation options made available to the borrower at the time of the live contact, the actions the borrower must take to be evaluated for such loss mitigation options, and at least one way that the borrower can find contact information for homeownership counseling services, such as referencing the borrower's periodic statement. The loss mitigation options listed under § 1024.39(e)(2) are not limited to a specific type of loss mitigation, as servicers must provide borrowers with information about all available loss mitigation types, such as forbearance extensions, repayment plans, loan modifications, short-sales, and others.

As revised, § 1024.39(e)(2) requires this additional information be provided in the live contact established with the borrower at least 10 days and no more than 45 days before the scheduled end of the forbearance program. The Bureau is also revising § 1024.39(e)(2) to address a servicer's obligations with respect to forbearance programs scheduled to end within 10 days after the effective date of this final rule. If the scheduled end date of the forbearance program occurs between August 31, 2021 and September 10, 2021, final § 1024.39(e)(2) requires the servicer to provide the additional information during the first live contact made pursuant to § 1024.39(a) after August 31, 2021.

Finally, the Bureau notes that § 1024.39(e)(2), as revised, works with the new reasonable diligence obligations in comment 41(b)(1)-4.iv to ensure

borrowers that submit incomplete applications receive notification of loss mitigation options that would be available after their COVID-19-related forbearance program ends.

Section 1024.41 Loss Mitigation Procedures

41(b) Receipt of a Loss Mitigation Application

41(b)(1) Complete Loss Mitigation Application

Comment 41(b)(1)-4.iii discusses a servicer's reasonable diligence obligations when a servicer offers a borrower a short-term payment forbearance program or a short-term repayment plan based on an evaluation of an incomplete loss mitigation application and provides the borrower the written notice pursuant to § 1024.41(c)(2)(iii). It also provides that reasonable diligence means servicers must contact the borrower before the short-term payment forbearance program ends (“the forbearance reasonable diligence contact”), but it does not specify when servicers must make the contact. Consequently, the Bureau proposed adding a new comment, comment 41(b)(1)-4.iv, to specify that, if the borrower is in a short-term payment forbearance program made available to borrowers experiencing a COVID-19-related hardship, servicers must make the forbearance reasonable diligence contact at least 30-days prior to the end of the short-term forbearance program. Additionally, the proposal specified that, if the borrower requests further assistance, the servicer must also exercise reasonable diligence to complete the loss mitigation application prior to the end of forbearance period. The Bureau solicited comment on the proposed 30-day deadline for completing the forbearance reasonable diligence contact at the end of the forbearance and whether a different deadline was appropriate. The Bureau also solicited comment on whether to extend these requirements to all borrowers exiting short-term payment forbearance programs during a specified time period, instead of limiting it to borrowers in a short-term payment forbearance program made available to borrowers experiencing a COVID-19-related hardship.

Overall, commenters generally supported the proposal. A few commenters, including consumer advocate commenters and an industry commenter, suggested a different deadline from the proposed 30-day deadline would be appropriate. The commenters suggested an earlier or later deadline. Specifically, the consumer advocate commenter indicated they believe the appropriate timing might depend on whether and how the Bureau finalizes proposed § 1024.41(f). Under one scenario, they believed that 30 days was appropriate, but under another scenario they urged the Bureau to move the deadline to resume reasonable diligence to at least 60 days before the end of the forbearance program. The industry commenter encouraged the Bureau to adopt a later deadline, which would allow servicers to complete the forbearance reasonable diligence contact within 30 days before the end of the forbearance. This commenter expressed the belief that borrowers would be more responsive if servicers could complete the forbearance reasonable diligence contact right before the borrower's forbearance ends.

The Bureau declines to revise the proposed 30-day deadline. The 30-day deadline aligns with GSE Quality Right Party Contact (QRPC) guidelines. Servicers are required to establish QRPC at least 30 days before the end of the initial 12-month cumulative COVID-19 forbearance period, or at least 30 days prior to the end of any subsequent forbearance plan term extension.

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The Bureau aimed to make this requirement complementary to existing GSE guidelines and to avoid exacerbating confusion among servicers attempting to comply with multiple compliance obligations.

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The Fed. Nat'l Mortg. Ass'n,

Lender Letter (LL-2021-02),

at 6 (Feb. 25, 2021),

https://singlefamily.fanniemae.com/media/24891/display;

The Fed. Home Loan Mortg. Corp.,

COVID-19 Servicing: Guidance for Helping Impacted Borrowers,

at 5 (May 1, 2021),

https://sf.freddiemac.com/content/_assets/resources/pdf/ebooks/helpstartshere-servicing-ebook.pdf.

The Bureau also received comments from industry commenters on whether the Bureau should extend the reasonable diligence protections of proposed comment 41(b)(1)-4.iv to all borrowers exiting short-term payment forbearance programs during a specified time period or retain the proposed limitation that the comment applies only to borrowers in short-term payment forbearance programs made available to borrowers experiencing a COVID-19-related hardship. These commenters encouraged the Bureau to retain the proposed limitation. Commenters noted that the proposed comment's requirements mirror current practices and would not create an extra burden for servicers to implement. The commenters cautioned against imposing any additional reasonable diligence requirements, citing that many servicers are fatigued from constant policy changes. The Bureau did not receive any comments suggesting that the proposed provision should apply to all borrowers exiting short-term payment forbearance programs. The Bureau is finalizing the applicability of comment 41(b)(1)-4.iv as proposed.

A few commenters, including industry commenters encouraged the Bureau to exclude servicers from the requirement to make the proposed forbearance reasonable diligence contact if the borrower voluntarily ends forbearance. To clarify that the reasonable diligence requirements included in new comment 41(b)(1)-4.iv mirror the scope of existing comment 41(b)(1)-4.iii and only apply if the borrower remains delinquent, the Bureau is adding the phrase “if the borrower remains delinquent” to proposed comment 41(b)(1)-4.iv. This language is in comment 41(b)(1)-4.iii but was inadvertently omitted from proposed comment 41(b)(1)-4.iv. The Bureau declines to exclude servicers from the forbearance reasonable diligence contact if the borrower voluntarily ends forbearance early. If a borrower voluntarily ends forbearance early and remains delinquent, the servicer must still make the forbearance reasonable diligence contact required by comment 41(b)(1)-4.iv. If a borrower voluntarily ends forbearance early and is no longer delinquent, servicers need not make the forbearance reasonable diligence contact.

Some industry commenters also urged the Bureau to eliminate the proposed requirement to exercise reasonable diligence to complete an application, stating that § 1024.41(c)(2)(v), adopted in the June 2020 IFR,

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and proposed § 1024.41(c)(2)(vi) permit servicers to offer certain loss mitigation options based on the evaluation of an incomplete application. Commenters indicated that they believe borrowers will be confused if servicers contact borrowers to evaluate them for a payment deferral or loan modification based on an incomplete application, but then also contact them to inquire if they want to complete a loss mitigation application. The Bureau holds that while § 1024.41(c)(2)(v) and new § 1024.41(c)(2)(vi) empower servicers to offer deferral or loan modifications based on the evaluation of an incomplete application, a servicer is still required to exercise reasonable diligence to complete an application unless the borrower accepts the deferral or loan modification offer. There are benefits to borrowers of being fully evaluated for all available loss

mitigation options based on complete application, and certain protections under the rules apply only once the borrower completes an application. In addition, if a servicer believes that a borrower may be confused by the reasonable diligence outreach, a servicer may provide additional information to the borrower to help explain the application process. The Bureau encourages this type of transparency in communications. However, once the borrower accepts a deferral offer or loan modification offer based on that evaluation of an incomplete application, the servicer is not required to continue to exercise reasonable diligence to complete any loss mitigation application that the borrower submitted before the servicer's offer of the accepted loss mitigation option.

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85 FR 39055 (June 30, 2020).

A few commenters requested that the Bureau clarify the method of compliance for the outreach requirements in comment 41(b)(1)-4. Specifically, an industry commenter requested that the Bureau clarify whether the outreach requirements could be satisfied either orally or in writing. A consumer advocate commenter requested that the Bureau clarify that the outreach must be sent in writing. The Bureau clarifies that the forbearance reasonable diligence contact required by comment 41(b)(1)-4.iv, like the forbearance reasonable diligence contact required by comment 41(b)(1)-4.iii can be oral or in writing. Servicers will likely find it beneficial to communicate their decisions in writing in some cases to prevent ambiguity and memorialize decisions. However, there may be circumstances where oral notification is advantageous due to time constraints, and the Bureau has concluded that the best approach is to allow the servicer to choose the appropriate mode of communication based on the particular facts and circumstances of each case.

For the reasons discussed above, the Bureau is finalizing comment 41(b)(1)-4.iv as proposed with a minor edit to clarify the provision applies only to delinquent borrowers. As finalized, comment 41(b)(1)-4.iv explains that if the borrower is in a short-term payment forbearance program made available to borrowers experiencing a COVID-19-related hardship, including a payment forbearance program made pursuant to the Coronavirus Economic Stability Act, section 4022 (15 U.S.C. 9056), that was offered to the borrower based on evaluation of an incomplete application, a servicer must contact the borrower no later than 30 days before the end of the forbearance period if the borrower remains delinquent and determine if the borrower wishes to complete the loss mitigation application and proceed with a full loss mitigation evaluation. If the borrower requests further assistance, the servicer must exercise reasonable diligence to complete the application before the end of the forbearance period.

41(c) Evaluation of Loss Mitigation Applications

41(c)(2)(i) In General

Section 1024.41(c)(2)(i) states that, in general, servicers shall not evade the requirement to evaluate a complete loss mitigation application for all loss mitigation options available to the borrower by making an offer based upon an incomplete application. For ease of reference, this section-by-section analysis generally refers to this provision as the “anti-evasion requirement.” Currently, the provision identifies three general exceptions to this anti-evasion requirement, § 1024.41(c)(2)(ii), (iii), and (v). As further described in the section-by-section analysis of § 1024.41(c)(2)(vi) below, the Bureau proposed to add a temporary exception to this anti-evasion requirement in new § 1024.41(c)(2)(vi) for certain loan modification options made available to borrowers experiencing COVID-19-related hardships. The Bureau also proposed to amend 1024.41(c)(2)(i) to reference the new proposed exception in § 1024.41(c)(2)(vi). The Bureau did not receive any comments on the addition of this reference and, because the Bureau is adopting § 1024.41(c)(2)(vi), the Bureau is finalizing the amendment to § 1024.41(c)(2)(i) as proposed.

41(c)(2)(v) Certain COVID-19-Related Loss Mitigation Options

Definition of a COVID-19-related hardship.

Section 1024.41(c)(2)(v) currently allows servicers to offer a borrower certain loss mitigation options made available to borrowers experiencing a COVID-19-related hardship based upon the evaluation of an incomplete application, provided that certain criteria are met. The Bureau added this provision to the mortgage servicing rules in its June 2020 IFR. Section 1024.41(c)(2)(v)(A)(

) refers to a COVID-19-related hardship as a financial hardship due, directly or indirectly, to the COVID-19 emergency. Section 1024.41(c)(2)(v)(A)(

) further states that the term COVID-19 emergency has the same meaning as under the Coronavirus Economic Stabilization Act, section 4022(a)(1)(15 U.S.C. 9056(a)(1)).

As discussed in the section-by-section analysis of § 1024.31, the Bureau proposed to define the term “COVID-19-related hardship” for purposes of subpart C, including § 1024.41(c)(2)(v), as “a financial hardship due, directly or indirectly, to the COVID-19 emergency as defined in the Coronavirus Economic Stabilization Act, section 4022(a)(1) (15 U.S.C. 9056(a)(1)).” Thus, the Bureau proposed a conforming amendment to § 1024.41(c)(2)(v) to utilize the proposed new term.

As further explained in the section-by-section analysis of § 1024.31, the Bureau is revising the proposed definition of the term “COVID-19-related hardship” for purposes of subpart C to refer in the final rule to the national emergency proclamation related to COVID-19, rather than to the COVID-19 emergency as defined in section 4022 of the CARES Act. The Bureau did not receive any comments on the conforming amendment in § 1024.41(c)(2)(v), and is finalizing it as proposed. The Bureau does not intend for this conforming amendment to substantively change § 1024.41(c)(2)(v).

Escrow Issues.

As the Bureau stated in the June 2020 IFR, § 1024.41(c)(2)(v)(A)(1) allows for some flexibility among loss mitigation options that may qualify for the exception. For example, although the loss mitigation options must defer all forborne or delinquent principal and interest payments under § 1024.41(c)(2)(v)(A)(1), the rule does not specify how servicers must treat any forborne or delinquent escrow amounts. A loss mitigation option would qualify for the exception if it defers repayment of escrow amounts, in addition to principal and interest payments, as long as it otherwise satisfies § 1024.41(c)(2)(v)(A).

The Bureau has received questions about whether servicers should issue a short-year annual escrow account statement under § 1024.17(i)(4) prior to offering a loss mitigation option under § 1024.41(c)(2)(v)(A). Regulation X does not require a short year statement prior to offering any loss mitigation option, but the Bureau strongly encourages servicers to conduct an escrow analysis and issue a short-year statement or annual statement, depending on the applicable timing. Doing so may help avoid unexpected potential escrow-related payment increases after the borrower has already agreed to a loss mitigation option, and can inform servicers of the information needed to provide a history of the escrow account, pursuant to § 1024.17(i)(2), after the loan becomes current.

The Bureau has also received questions about how servicers may treat funds that they have advanced or plan to advance to cover escrow shortages in

this context. Assume a servicer performs an escrow analysis before offering a loss mitigation option to the borrower under § 1024.41(c)(2)(v)(A), and the analysis reveals a shortage. The Bureau has received questions about whether the servicer is permitted under Regulation X to advance funds to cover the shortage (for example, if a borrower is in a forbearance) and seek repayment of those advanced funds as part of the non-interest bearing deferred balance that is due when the mortgage loan is refinanced, the mortgaged property is sold, the term of the mortgage loan ends, or, for a mortgage loan insured by the FHA, the mortgage insurance terminates. Section 1024.17 has specific rules and procedures for the administration of escrow accounts associated with federally related mortgage loans, but it does not address the specific situation described in the question. Regulation X does not prohibit a servicer from seeking repayment of funds advanced to cover the shortage as described above. Section 1024.17 is intended to ensure that servicers do not require borrowers to deposit excessive amounts in an escrow account (generally limiting monthly payments to 1/12th of the amount of the total anticipated disbursements, plus a cushion not to exceed 1/6th of those total anticipated disbursements, during the upcoming year). Loss mitigation programs such as those permitted under § 1024.41(c)(2)(v)(A) give the borrower more time to repay forborne or delinquent amounts and does not specify how servicers must treat any forborne or delinquent escrow amounts. Regulation X does not prohibit the borrower and servicer from agreeing to a loss mitigation option that allows for the repayment of funds that a servicer has advanced or will advance to cover an escrow shortage.

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Additionally, when a borrower is more than 30 days delinquent, a servicer may recover a deficiency in the borrower's escrow account pursuant to the terms of the mortgage loan documents. Deficiencies exist when there is a negative balance in the borrower's escrow account, which can occur, for example, when a servicer advances funds for expenses such as taxes and insurance.

See

§ 1024.17(f)(4)(iii).

41(c)(2)(vi) Certain COVID-19-Related Loan Modification Options

The Bureau's Proposal

As discussed in more detail in the section-by-section analysis of § 1024.41(c)(2)(i), in general, servicers shall not evade the requirement to evaluate a complete loss mitigation application for all loss mitigation options available to the borrower by making an offer based upon an incomplete application. The Bureau proposed to add a new temporary exception to this anti-evasion requirement to permit servicers to offer certain loan modification options made available to borrowers with COVID-19-related hardships based on the evaluation of an incomplete application. The exception is temporary because the Bureau in this final rule is defining the term “COVID-19-related hardship” for purposes of subpart C to refer to a financial hardship due, directly or indirectly, to the national emergency for the COVID-19 pandemic declared in Proclamation 9994 on March 13, 2020 (beginning on March 1, 2020) and continued on February 24, 2021. At some point after the national emergency ends, servicers will no longer make available loan modification options to borrowers with COVID-19-related hardships for purposes of subpart C.

The proposal would have established eligibility criteria for the new exception in proposed § 1024.41(c)(2)(vi)(A). Specifically, a loan modification eligible for the proposed new exception would have to limit a potential term extension to 480 months, not increase the required monthly principal and interest payment, not charge a fee associated with the option, and waive certain other fees and charges. For loan modifications to qualify under the proposed new exception, they would not be able to charge interest on amounts that the borrower may delay paying until the mortgage loan is refinanced, the mortgaged property is sold, or the loan modification matures. However, loan modifications that charge interest on amounts that are capitalized into a new modified term would qualify for the proposed new exception, as long as they otherwise satisfy all of the criteria in § 1024.41(c)(2)(vi)(A). To qualify for the proposed new exception, a loan modification also either (1) would have to cause any preexisting delinquency to end upon the borrower's acceptance of the offer or (2) be designed to end any preexisting delinquency on the mortgage loan upon the borrower satisfying the servicer's requirements for completing a trial loan modification plan and accepting a permanent loan modification.

Once the borrower accepts an offer made pursuant to proposed § 1024.41(c)(2)(vi)(A), the Bureau proposed to exclude servicers from the requirement to exercise reasonable diligence required by § 1024.41(b)(1) and to send the acknowledgement notice required by § 1024.41(b)(1). However, the proposal would have required the servicer to immediately resume reasonable diligence efforts required by § 1024.41(b)(1) if the borrower fails to perform under a trial loan modification plan offered pursuant to the proposed new exception or requests further assistance.

The Bureau solicited comment on the proposed new exception. For the reasons discussed below, the Bureau is finalizing proposed § 1024.41(c)(2)(vi) largely as proposed, with some revisions to address certain comments received, including limiting the requirement to waive certain fees, as discussed in more detail below.

Comments Received

General comments about the proposed exception.

The vast majority of commenters, including industry, consumer advocate commenters, and individuals, expressed general support for proposed § 1024.41(c)(2)(vi). Most commenters who expressed support for proposed § 1024.41(c)(2)(vi) also urged the Bureau to make certain revisions to the provision. In general, industry commenters requested that the Bureau provide additional flexibility, clarification, or both surrounding what loan modification options can qualify for the new anti-evasion exception and the regulatory relief provided to servicers after they offer these loan modifications. Consumer advocate commenters generally requested that the final rule require that servicers provide various additional disclosures and protections to borrowers who are evaluated for a loan modification option based on the evaluation of an incomplete application. The Bureau's responses to these comments are discussed further in this section and the section-by-section analyses below.

A few individuals and a few industry commenters expressed opposition to the proposed new exception overall for a variety of reasons and suggested removing it entirely or replacing it with various alternatives. The Bureau concludes that it is appropriate to add a new exception to the servicing rule's anti-evasion requirement for certain loan modification options, like the GSEs' flex modification programs, FHA's COVID-19 owner-occupant loan modification, and other comparable programs (“streamlined loan modifications”).

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These programs will

help ensure that servicers have sufficient resources to efficiently and accurately respond to loss mitigation assistance requests from the unusually large number of borrowers who will be seeking assistance from them in the coming months as Federal foreclosure moratoria and many forbearance programs end. And borrowers dealing with the social and economic effects of the COVID-19 emergency may be less likely than they would be under normal circumstances to take the steps necessary to complete a loss mitigation application to receive a full evaluation. This could prolong their delinquencies and put them at risk for foreclosure referral. Moreover, by allowing servicers to assist borrowers eligible for streamlined loan modifications more efficiently, servicers will have more resources to provide other loss mitigation assistance to borrowers who are ineligible for or do not want streamlined loan modifications.

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A loan modification that a servicer offers based upon the evaluation of an incomplete loss mitigation application can qualify for the exception in § 1024.41(c)(2)(vi) even if the servicer collects information, such as information to verify income, from a borrower. Section 1024.41(b)(1) defines a complete loss mitigation application as an application in connection with which a servicer has received all the information that the servicer requires from a borrower in evaluating applications

for the loss mitigation options available to the borrower. If a servicer collects a complete loss mitigation application, the servicer is required to comply with all of the provisions of § 1024.41 relating to the receipt of complete loss mitigation applications, such as a written notice of determination, the right to an appeal, and dual tracking protections. If a servicer collects information that does not constitute a complete loss mitigation application, the servicer is prohibited from making an offer for a loss mitigation option by § 1024.41(c)(2)(ii), unless one of the exceptions listed in § 1024.41(c)(2)(ii) through (vi) applies.

Additional disclosures and protections.

Some consumer advocate commenters urged the Bureau to provide additional disclosures and protections in connection with the evaluation of a streamlined loan modification option under proposed § 1024.41(c)(2)(vi). A few of these commenters urged the Bureau to include additional requirements for eligible loan modifications, including, for example, requiring certain written notices, denial notices, the right to appeal a decision, dual tracking protections, and simultaneous evaluation for all available streamlined loan modification options. One of these commenters also urged the Bureau to prohibit a servicer from requiring a borrower to give up the option of obtaining a streamlined loan modification if the borrower completes a loss mitigation application. This commenter expressed concern that borrowers would be negatively affected by not knowing the options for which they had been reviewed if, for example, they had been denied for an option on the basis of inaccurate information. A group of State Attorneys General also commented generally that a borrower should be aware of all loss mitigation options available to them.

One of the consumer advocate commenters urged the Bureau to require that a servicer include streamlined options during a review of a complete loss mitigation option that may take place after a borrower is offered a loan modification under the exception, and expressed skepticism that servicers would complete another loan modification quickly after implementing a loan modification offered under the exception. The same commenter expressed concern that defaults or trial loan modification plan failures for loan modification options offered under the exception would render a borrower ineligible to receive another streamlined loan modification for a period of time.

The Bureau acknowledges that borrowers accepting a loan modification offer under the new exception will not receive protections under § 1024.41 that are critical in other circumstances. However, the Bureau concludes that the exception set forth in final § 1024.41(c)(2)(vi)(A) will be unlikely to affect this benefit in most cases, given the narrow scope and particular circumstances of the exception. If a borrower is interested in another form of loss mitigation after accepting an offer made pursuant to § 1024.41(c)(2)(vi)(A), they would still have the right under § 1024.41 to submit a complete loss mitigation application and receive an evaluation for all available options. This would be the case even if, for example, a borrower accepted a loan modification trial plan offered pursuant to § 1024.41(c)(2)(vi)(A) and then failed to perform on that plan.

Further, to be eligible for the exception under § 1024.41(c)(2)(vi)(A), a loan modification must bring the loan current or be designed to end any preexisting delinquency on the mortgage loan upon the borrower satisfying the servicer's requirements for completing a trial loan modification plan and accepting a permanent loan modification. In most cases, a borrower must be more than 120 days delinquent before a servicer may make the first notice or filing required under applicable law to initiate foreclosure proceedings. Thus, if a borrower wishes to pursue another loss mitigation option after accepting a permanent loan modification offer, the borrower will still have a considerable amount of time to complete a loss mitigation application before they would be at risk for foreclosure.

Additionally, if a borrower fails to perform under a trial loan modification plan offered pursuant to § 1024.41(c)(2)(vi)(A) or requests further assistance, under § 1024.41(c)(2)(vi)(B) the servicer must immediately resume reasonable diligence efforts to collect a complete loss mitigation application as required under § 1024.41(b)(1). Also, as further discussed below, in this final rule the Bureau is amending § 1024.41(c)(2)(vi)(B) to adopt as final a requirement that if a borrower fails to perform under a trial loan modification plan offered pursuant to § 1024.41(c)(2)(vi)(A) or requests further assistance, the servicer must send the borrower the notice required by § 1024.41(b)(2)(i)(B), with regard to the most recent loss mitigation application the borrower submitted prior to the servicer's offer of the loan modification under the exception, unless the servicer has already sent that notice to the borrower.

Finally, as discussed in the section-by-section analysis of § 1024.41(f)(3), the Bureau is finalizing requirements for special COVID-19 loss mitigation procedural safeguards that will

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