The Consumer Financial Protection Bureau (CFPB) and Conference of State Bank Supervisors (CSBS) recently issued a joint statement addressing mortgage loan forbearances under the CARES Act. It appears that the conduct of mortgage industry members regarding forbearances will be a focus of the CFPB and state banking regulators in examinations or otherwise.

In the statement, the CFPB and CSBS first summarize the forbearance provisions of the CARES Act and provide links to guidance that they and other agencies have issued. They then address the permissibility of certain specific actions.

Forbearance Period Shorter Than 180 Days. The CARES Act provides for an initial forbearance period of up to 180 days if a borrower requests a forbearance and affirms a financial hardship due, directly or indirectly, to the COVID-19 emergency. In the joint statement, the CFPB and CSBS refer to the required affirmation as an attestation. The CFPB and CSBS advise that servicers can grant a forbearance term of less than 180 days at the borrower’s request or with the borrower’s consent. Servicers must default to the forbearance term requested by the borrower, not to exceed 180 days, if the servicer and borrower cannot agree on a term, or communication with the requesting borrower is not possible. If the borrower agrees to an initial forbearance term of less than 180 days, the servicer must extend the term unless the borrower agrees to no extension, and no further attestation of financial hardship may be required. The CFPB and CSBS also caution as follows when a servicer implements a forbearance term of less than 180 days with the borrower’s consent: “[T]he servicer’s board of directors and management must provide the additional resources necessary to continue forbearance as required under the CARES Act. In order to be responsive to borrowers and to ensure compliance with law, management should assess its ability to adequately perform under shorter, incremental forbearance periods, including any supplemental systems or human resources needed.”

No Information or Proof From Borrower. The CFPB and CSBS confirm that a servicer may not require any information from a borrower supporting the request for a forbearance, and that borrowers do not need to prove a hardship. However, a servicer may work with a borrower to better understand their situation provided that “(i) borrowers are not misled about the requirements of, or dissuaded from proceeding with, a CARES Act forbearance if they have a COVID-related hardship and (ii) any information obtained from the borrower has no bearing on the servicer’s provision of a CARES Act forbearance.” Although not noted in the joint statement, Fannie Mae and Freddie Mac have developed scripts for discussing forbearance options with borrowers.

Borrower Entitled to Forbearance. For a borrower that meets the conditions for a CARES Act forbearance, the CFPB and CSBS make clear that a servicer may not determine that a borrower does not need a forbearance or limit the amount of the forbearance that is given, regardless of the delinquency status of the borrower.

No Steering of Borrowers Away From a Forbearance. The CFPB and CSBS note that some servicers are steering borrowers away from requesting a forbearance and state as follows: “The CARES Act dictates that forbearance must be granted upon request by an attesting borrower. Examiners will evaluate communications between borrowers and their servicers, including the servicer’s communication of repayment options for legal compliance or resulting consumer harm. A servicer that offers very limited repayment options when others are reasonably available could[,] depending on the facts and circumstances, be at risk of legal violation or causing consumer harm.”

No Discouraging Borrowers From Requesting a Forbearance. Finally, the CFPB and CSBS address the use of loan closing attestations that are designed to discourage borrowers that subsequently experience a COVID-19 related hardship from requesting forbearance: “Examiners will evaluate originator communications with borrowers for legal compliance or causing consumer harm. An originator that misleads a borrower concerning her rights under the CARES Act could, depending on the facts and circumstances, be at risk of committing a legal violation or causing consumer harm.”


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