CFPB Proposes Mortgage Servicing Changes; Supreme Court Weighs in on TCPA

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REGULATORY DEVELOPMENTS

CFPB Warns Mortgage Servicers to Prepare Now for Anticipated Surge of Homeowners Needing Assistance

On March 31, the CFPB issued Compliance Bulletin 2021-02, promising accountability for servicers who fail to put struggling families first and asking them to prepare now to deal with the foreseeable surge of borrowers in need of loss mitigation assistance when the pandemic-related federal emergency mortgage protections expire in June. The CFPB communicated that it will be monitoring how mortgage servicers engage with borrowers, respond to borrower requests, and process applications for loss mitigation to prevent avoidable foreclosures, expecting servicers to:

  • Contact borrowers in forbearance before the end of the forbearance period so they have time to apply for help;
  • Work to ensure borrowers have all necessary information;
  • Help borrowers in obtaining documents and other information needed to evaluate borrowers for assistance;
  • Appropriately manage communications with borrowers who have limited English proficiency;
  • Evaluate borrowers’ income from public assistance, child-support, alimony, or other sources;
  • Maintain compliance with the Equal Credit Opportunity Act and other laws;
  • Dedicate sufficient resources and staff to ensure hold times do not exceed industry averages and inquiries are handled promptly; and
  • Comply with foreclosure restrictions under federal and state law to ensure homeowners have an opportunity to save their homes before foreclosure is initiated.

Servicers who demonstrate effectiveness in helping consumers will be evaluated consistent with the Joint Statement on Supervisory and Enforcement Practices Regarding the Mortgage Servicing Rules in Response to the COVID-19 Emergency and the CARES Act, which provides flexibility on certain timing requirements in the regulations, and a servicer’s effectiveness in helping consumers will also be considered in the event of identified compliance issues.

CFPB Proposes Mortgage Servicing Changes to Prevent Wave of COVID-19 Foreclosures

On April 5, shortly after issuance of Compliance Bulletin 2021-02, the CFPB issued a Notice of Proposed Rulemaking to revise Regulation X (12 CFR 1024) by adding borrower protections related to the COVID-19- emergency.”

The CFPB’s Proposed Rulemaking intends to give borrowers time, give servicers options, and keep borrowers informed of their options by:

  • Defining “COVID-19-related hardship” to mean a financial hardship related to the COVID-19 emergency, as defined in the CARES Act;
  • Requiring servicers to take certain steps with respect to live contacts with borrowers, which could include asking borrowers at the time of live contact if they are experiencing a COVID-19-related hardship, listing and describing forbearance programs or loss mitigation options available to a borrower through the servicer, and explaining which actions the borrower must take to be evaluated for such forbearance programs or loss mitigation options;
  • Requiring servicers to contact borrowers in short-term payment forbearance programs, offered on an incomplete application, no later than 30 days before the end of the short-term payment forbearance program to assist in completing the loss mitigation application;
  • Permitting servicers to offer loan modifications based on the evaluation of an incomplete application if certain criteria are met and easing a servicer’s obligation to exercise reasonable diligence in completing an approved but incomplete loss mitigation application until the borrower fails to perform under a required trial loan modification or requests further assistance; and
  • Preventing servicers from making the first notice or filing for foreclosure because of delinquency until December 31, 2021.

The Notice of Proposed Rulemaking would not change coverage of the Mortgage Servicing Rule and would therefore not apply to “small servicers” or to any property that is not a borrower's principal residence. A summary of the proposed rule can be found here.

Comments on the Proposed Rulemaking must be submitted before May 11, 2021.

CFPB Proposes Delay of Effective Date for Recent Debt Collection Rules

On April 7, the CFPB issued a Notice of Proposed Rulemaking to delay by 60 days the effective date of two final rules issued under the Fair Debt Collection Practices Act (FDCPA) in late 2020. The first debt collection rule, issued in October 2020, focuses on the use of communications related to debt collection, and clarifies prohibitions on harassment and abuse, false or misleading representations, and unfair practices by debt collectors when collecting consumer debt. The second debt collection rule, issued in December 2020, clarifies disclosures debt collectors must provide to consumers at the beginning of collection communications, prohibits debt collectors from making threats to sue, or from suing, consumers on time-barred debt, and requires debt collectors to take specific steps to disclose the existence of a debt to consumers before reporting information about the debt to a consumer reporting agency. The proposed rule would extend the effective date of both rules from November 30, 2021 to January 29, 2022. According to the CFPB, the proposed delay would allow stakeholders affected by the pandemic additional time to review and implement the rules. Comments on the extension, including whether the proposed 60-day extension is sufficient, will be due 30 days after publication in the Federal Register.

FinCEN Seeks Comment on New Beneficial Ownership Reporting Rules

On April 5, FinCEN issued an advance notice of proposed rulemaking (ANPR) seeking public comment on a variety of topics related to the new beneficial ownership reporting rules under the Corporate Transparency Act (CTA), which is part of the Anti-Money Laundering Act of 2020, which in turn is part of the Fiscal Year 2021 National Defense Authorization Act. The CTA generally requires companies to provide FinCEN identifying information about the natural persons who directly or indirectly own or control them, and FinCEN is required to maintain this information in a database for limited purposes. The ANPR seeks comments on companies’ reporting procedures and standards, as well as related database use and information disclosures. Comments may impact the scope of the new rules to the extent that FinCEN seeks comment regarding definitions and similar aspects of the rules. Comments on the ANPR must be submitted by May 5, 2021.

FDIC Consumer Compliance Supervisory Highlights

On March 31, the FDIC published its Consumer Compliance Supervisory Highlights, a publication designed to enhance transparency regarding the FDIC’s consumer compliance supervisory activities and provide a high-level overview of consumer compliance issues identified in 2020 through the FDIC’s supervision of state non-member banks and thrifts. Topics include a summary of the FDIC’s supervisory approach in response to COVID-19, supervisory observations related to consumer protection laws, examples of practices that may be useful to institutions in mitigating risks, regulatory developments, and consumer compliance resources.

LITIGATION AND ENFORCEMENT

Supreme Court Ruling Protects Companies’ Ability to Contact Customers

In a significant win for businesses, the U.S. Supreme Court confirmed that customers can receive important communications from companies with whom they do business. The court issued its highly anticipated opinion in the case of Facebook v. Duguid — which addresses the definition of “automatic telephone dialing system,” commonly known as an “autodialer,” under the Telephone Consumer Protection Act (TCPA).

In light of this recent decision, Goodwin partners Brooks Brown and Kyle Tayman, who specialize in TCPA class action defense and TCPA compliance, hosted a webinar discussing the implications of the U.S. Supreme Court’s recent decision about the TCPA definition, as well as provide comment on the notable takeaways from this significant business-friendly ruling.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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