The Consumer Financial Protection Bureau (CFPB) and the Conference of State Bank Supervisors (CSBS) have issued guidance to mortgage servicers regarding the handling of requests for COVID-19-related mortgage forbearance plans.
The guidance clarifies how mortgage servicers should go about offering forbearance plans to borrowers. For example, it reminds servicers that they are allowed to offer forbearance plans that run shorter than the initial 180-day period referenced in the CARES Act.
“According to investor guidelines, servicers can grant CARES Act forbearance periods for less than 180-days at the borrower’s request or with the borrower’s consent,” the CFPB writes in its guidance. “However, servicers must default to the term requested by the borrower (not to exceed 180 days) if the borrower and servicer cannot agree on an appropriate forbearance length or communication with the requesting borrower is not possible under the circumstances.”
The agencies also remind mortgage servicers that they are never to request documentation showing hardship when a borrower is exploring a forbearance plan.
“Forbearance must be granted if requested and the borrower attests to a COVID-related hardship,” the guidance states.
Although servicers are forbidden from requesting information supporting the need for forbearance, they are allowed to “work with the borrower to better understand the borrower’s situation.”
In addition, servicers are to “grant forbearance to any requesting borrower with a federally backed mortgage loan attesting to a COVID-19 related hardship regardless of delinquency status.”
Lastly, servicers are prohibited from steering borrowers away from requesting forbearance.
“The CARES Act dictates that forbearance must be granted upon request by an attesting borrower,” the guidance states. “Examiners will evaluate communications between borrowers and their servicers, including the servicer’s communication of repayment options for legal compliance or resulting consumer harm.”
The agencies’ guidance also reminds mortgage originators that they are not to “structure closing attestations in a manner designed to discourage borrowers that subsequently experience a COVID-related hardship from requesting forbearance.”
Although the rate of requests for COVID-19 forbearance plans has slowed considerably in recent weeks, as of May 31, about 4.3 million homeowners were in forbearance plans, according to the Mortgage Bankers Association (MBA). That’s about 8.53% of all mortgages.