As forbearances continue to cloud the mortgage industry with uncertainty and doubt, the CFPB has warned servicers to be prepared for an onslaught of borrowers who will need payment assistance in the 2nd half of 2021. How can lenders are servicers protect themselves from unintentionally violating contact rules on social media during this difficult time, especially as the CFPB is pushing to extension the foreclosure moratorium to 2022?
The COVID-19 pandemic has forced many industries to move quickly to combat the negative effects that quarantining, social distancing, and shuttered businesses have had on the national and global economy. One of the hardest hit sectors of finance has been that of the mortgage industry. As job security has decreased and uncertainty in the future of the economy has grown, Americans have been hit hard in the pocketbook and have had to forego many expenses just to make ends meet. And inevitably, one of these expenses that many Americans currently find themselves behind on is their mortgage payment.
In January and February of 2020, the Consumer Financial Protection Bureau (CFPB) rolled out payment suspension and mortgage forbearance programs, known as the Coronavirus Aid, Relief, and Economic Security (CARES) Act, in order to protect citizens from foreclosure for the duration of the pandemic emergency. As of January 2021, roughly 2.7 million homeowners are enrolled in these protective programs, but their initial foreclosure prevention period was limited to 18 months. That means that - for millions of Americans - their protections against falling behind on their mortgages is set to expire in just a few short months.
However, help may be on the horizon for the 5% of Americans who are behind on their house payments, in the form of a new rule proposed by the CFPB. This new rule would establish a “temporary emergency pre-foreclosure review period” that would block servicers from initiating foreclosure processes before December 31, 2021. While the initial moratorium created by the CARES Act only applied to loans backed by Fannie, Freddie, VA, and USDA, the extension would apply to all mortgage loans, even those through private banks.
Obviously, this proposed extension will create challenges when it comes to mortgage servicers’ approach to social media. Presuming that the CARES Act and its protections are lengthened per the CFPB’s proposal, it will be imperative that loan officers and other social media active employees of servicers continue to take the utmost care in conveying accurate information to prospective and current customers when it comes to what their rights are under COVID-19 protections. Sharing incorrect information with customers as to what they can, or can’t, allow under the provisions of CARES would be a serious violation of RESPA, TILA, and UDAAP, to name just a few federal banking regulations.
COVID-19 has created a multitude of challenges for the mortgage industry, both on the customer side and the servicer side. Rolling with the punches and continuing to comply with federal lending policy is a crucial component of lending policy during these tough times. Only by carefully researching and understanding all facets of the CARES moratorium can lenders continue to fairly serve their customers while maintaining compliance in today’s hectic mortgage landscape.
Financial institutions are responsible for monitoring and controlling the risks related to social...