On April 5th, the CFPB proposed a set of rule changes intended to prevent foreclosures as emergency federal foreclosure protections expire this summer. Given that the expected surge of borrowers exiting forbearance in the fall will put mortgage servicers under strain, the proposed rules seek to ensure that servicers and borrowers work together to prevent foreclosures.

The proposed rules intend to:

  1. Give borrowers time: The proposed rules provide a special pre-foreclosure review period that would generally prohibit servicers from starting foreclosure until after December 31, 2021.
  2. Give servicers options: The proposed rules permit servicers to offer certain streamlined loan modification options to borrowers with COVID-19-related hardships based on the evaluation of an incomplete application. This provision would only be available for modifications that do not increase a borrower’s monthly payment and that extend the loan’s term by no more than 40 years from the modification’s effective date.
  3. Keep borrowers informed: The proposed rules provide temporary changes to certain required servicer communications to make sure that borrowers receive key information about their options at the appropriate time.

Continue Reading CFPB Proposes Mortgage Servicing Rule Changes to Prevent Foreclosures

The CFPB issued a compliance bulletin on April 1st warning mortgage servicers to take all necessary steps to prevent a wave of foreclosures this fall. The CFPB advised that beginning with the expiration of the federal foreclosure moratoriums at the end of June 2021, mortgage servicers will need ramped-up capacity to reach out and respond to the large number of homeowners requiring loss mitigation assistance. The CFPB will monitor how servicers engage with borrowers, respond to borrower requests, and process applications for loss mitigation. The Bureau is focused on preventing avoidable foreclosures.

“Servicers who put struggling families first have nothing to fear from our oversight, but we will hold accountable those who cause harm to homeowners and families,” said CFPB Acting Director Dave Uejio. Read the full compliance bulletin and policy guidance here.

While the COVID-19 pandemic affected nearly every industry last year, the consumer finance industry faced unique challenges in the wake of economic changes and government response. In this report Perkins Coie offers an analysis of the past year’s most noteworthy regulatory developments and litigation outcomes in the mortgage lending and servicing industry. We review the policies established by federal and state governments in response to the COVID-19 pandemic and the adjustments made by mortgage lenders and servicers in response to the new policies and regulations.

Read the full report here.

CFPB Director nominee, Rohit Chopra, testifies about his potential regulatory and enforcement priorities in Senate Hearing. President Biden tapped Rohit Chopra, currently the FTC Commissioner, as his nominee to serve as the Consumer Finance Protection Bureau’s (CFPB) Director. During his nomination hearing in front of the United States Senate Committee on Banking, Housing, and Urban Affairs, Chopra testified about his potential regulatory and enforcement priorities as head of the consumer finance regulator. In his prepared statement, Chopra acknowledged the widespread and lasting effects of the global pandemic and highlighted particular concerns for the housing market. During the hearing, Chopra spoke about the economic crisis from a decade ago and “how unlawful and avoidable foreclosures proved to be catastrophic in cities, small towns, and rural areas alike, contributing to deeper social divisions and inequities.” He also mentioned that if confirmed, he would focus on fair lending. Chopra also answered questions about Fintech, credit reporting, the housing market and other topics. See his full testimony here.

As the government revives its Paycheck Protection Program (PPP) with hundreds of billions of dollars in additional loans available to small businesses, there are fresh signs that government fraud investigations and whistleblower litigation related to the loan program are ramping up. DOJ’s first-ever settlement of violations of the civil False Claims Act related to the PPP highlight the scrutiny facing the PPP and risks for borrowers just as the PPP enters a new phase following the December 27, 2020, Economic Aid Act. This update provides an overview of the latest developments in fraud enforcement actions related to the PPP and key takeaways from the recent False Claims Act settlement.

Click here to read the full update.

The Small Business Administration (SBA) announced that they will begin accepting loan applications from community financial institutions for new “first draw” Paycheck Protection Program (PPP) loans beginning on January 11 and for “second draw” PPP loans beginning on January 13. Other lenders will be allowed to submit loan applications shortly thereafter.

New guidance and loan application forms issued by the SBA and U.S. Department of Treasury provide clarifications and some changes as to who may be eligible for this round of PPP loans and the amount that can be borrowed. Some borrowers that previously qualified for PPP loans will not be eligible to receive “second draw” PPP loans.

This update outlines the key takeaways from this new guidance and the new application forms.

The Consumer Financial Protection Bureau (CFPB) released two final rules amending the General Qualified Mortgage loan definition in Regulation Z and creating a new “Seasoned QM” loan category in Regulation Z. The General QM Final Rule replaces the current requirement for the General QM loans that the consumer’s debt-to-income ratio (DTI) not exceed 43 percent with a limit based on the loan’s pricing. The Seasoned QM Final Rule creates a new category of Seasoned QMs for first-lien, fixed-rate covered transactions that have met certain performance requirements, are held in portfolio by the originating creditor or first purchaser for a 36-month period, comply with general restrictions on product features and points and fees, and meet certain underwriting requirements.

The General QM Final Rule and the Seasoned QM Final Rule will take effect 60 days after publication in the Federal Register. The General QM Final Rule will have a mandatory compliance date of July 1, 2021. The Seasoned QM Final Rule will apply to covered transactions for which creditors receive an application on or after the effective date.

Notably, the GSE “Patch,” which provides QM status to loans qualifying for sale to Fannie Mae or Freddie Mac, will expire on the mandatory compliance date of the General QM Final Rule (July 1, 2021), or the date the GSEs exit conservatorship, whichever comes first.

Read the CFPB’s press release here.

The latest COVID-19 relief legislation provided some additional aid and clarity for a select group of debtors and left many other questions unanswered. While most of the attention was directed to restarting the PPP payments and other benefits to individuals, the law makes changes to the Bankruptcy Code as well.

Small business debtors (plus family farmers and Chapter 13 debtors) can now obtain PPP loans while in bankruptcy while other Chapter 11 debtors cannot. Landlords and suppliers that provided deferred payment agreements will have limited protection from preference actions.

Click here to read more.

 

Long-awaited action by Congress provides a refresh on the Paycheck Protection Program, allowing for new loans. Changes to the terms of PPP loans could benefit borrowers and additional lending ability includes the option for existing PPP borrowers to obtain a second loan.

Click here to read the full update.

The Consumer Financial Protection Bureau (CFPB) announced today that it has entered into a settlement with Nationstar Mortgage, LLC, d/b/a “Mr. Cooper,” one of the nation’s largest mortgage servicers and the largest non-bank mortgage servicer in the United States. The bureau’s complaint claims that Nationstar engaged in unfair and deceptive acts and practices in violation of the Consumer Financial Protection Act of 2010, violated the Real Estate Settlement Procedures Act (RESPA), and violated the Homeowners Protection Act of 1998 (HPA).

The bureau alleges that from January 2012 through December 2015, Mr. Cooper violated multiple federal consumer financial laws, causing substantial harm to the borrowers whose mortgage loans it serviced, including distressed borrowers. Specifically, the bureau claims that Nationstar (1) failed to identify thousands of loans on its systems that had pending-loss mitigation applications or trial-modification plans, and as a result failed to honor borrowers’ loan modification agreements; (2) foreclosed on borrowers to whom it had promised it would not foreclose while their loss mitigation applications were pending; (3) improperly increased borrowers’ permanent, modified monthly loan payments; (4) failed to timely disburse borrowers’ tax payments from their escrow accounts; (5) failed to properly conduct escrow analyses for borrowers during their Chapter 13 bankruptcy proceedings; and (6) failed to timely remove private mortgage insurance from borrowers’ accounts. Continue Reading Consumer Financial Protection Bureau And Multiple States Enter Into Settlement With Nationstar Mortgage, LLC For Alleged Unlawful Servicing Practices