On May 22, 2020, the CFPB issued a No-Action Letter (NAL) Template to a software company utilizing an internet-based platform for submission and processing of loss mitigation applications. Mortgage servicers may use the NAL Template to apply for NALs if they wish to implement the web-based loss mitigation platform. The CFPB also issued a statement that “digitizing the loss mitigation application process has the potential to improve a process that is experiencing an increase in loss mitigation requests from consumers due to the COVID-19 pandemic.”
As discussed in a previous post, the CFPB revamped its NAL Policy in September of 2019 to expand the program and make the application process easier. In the three years prior to the revision, only one NAL had been obtained. Under the new policy, however, we have now seen three NAL Templates approved by the CFPB.
This NAL template was approved upon the application of Brace Software Inc., which offers an online platform for implementing loss mitigation processes. Mortgage servicers wishing to implement Brace’s online platform may apply for a NAL based on the template. In general, an applicant would need to certify that they intend to use the web-based platform to process loss mitigation applications, but may also continue to use other methods to process loss mitigation applications. When a borrower utilizes the online platform to apply for loss mitigation, a servicer would need to consider the loss mitigation application “received” for purposes of Regulation X, 12 CFR 1024.41(b)(2), when the borrower clicks “submit” in the online application form. If a servicer opts to use the platform and wises to receive a NAL under the template, they must also process and give effect to cease communication requests received on the platform in addition to (but not instead of) processing and giving effect to cease communication requests received in writing. Of course, if a servicer wished to expand upon the platform, to functionalities beyond loss mitigation and cease communication requests, such information would also be included in an application for a NAL based on the template.
A NAL received by a servicer from the CFPB under this template would likely include a statement that, unless terminated, the CFPB will not make supervisory findings or bring a supervisory or enforcement action against the servicer under Regulation X, 12 CFR 1024.41(b)(2); section 805(c) of the FDCPA; or under 12 U.S.C. 5531, 5536.
Although this template appears limited to the implementation of Brace’s proprietary software services, it does signal the CFPB’s willingness to issue NALs for web-based mortgage servicing interfaces. As noted in Brace’s own application, while there may not currently be similar web-based platforms “there exists a vast array of vendors who have the capability to step in quickly and design a similar process.” Thus, it is possible we may see a proliferation of online mortgage servicing technologies which receive NALs from the CFPB.
