Dear Boards of Directors and Chief Executive Officers:
On June 30, 2021, the Consumer Financial Protection Bureau (CFPB) published in the Federal Register a final rule (opens new window) (You will be leaving NCUA.gov and accessing a non-NCUA website. We encourage you to read the NCUA's exit link policies. (opens new page).) temporarily amending certain mortgage servicing requirements under Regulation X to assist borrowers affected by the COVID-19 emergency.1 The 2021 Mortgage Servicing COVID-19 final rule only applies to servicers that service mortgages secured by a borrower’s principal residence.2 The rule does not apply to small servicers.3
Key provisions of the rule, which is effective on August 31, 2021, are summarized below. Credit unions should review the rule in its entirety and ensure compliance with these temporary amendments.
Defines COVID-19 Related Hardship (Amends Section 1024.31)
The final rule defines a COVID-19 related hardship to mean “a financial hardship due, directly or indirectly, to the national emergency for the COVID-19 pandemic declared in Proclamation 9994 on March 13, 2020 (beginning on March 1, 2020) and continued on February 24, 2021…”
Modifies Early Intervention Requirements (Amends Section 1024.39)
The final rule temporarily modifies early intervention live-contact messages and reasonable diligence obligations to help ensure that borrowers experiencing a COVID-19 related hardship have timely and accurate information about their loss mitigation options. Among other things, the rule requires servicers to take additional actions during live contacts related to a COVID-19 hardship until October 1, 2022.
Permits Modifications Based on Incomplete Application (Amends Section 1024.41)
The final rule authorizes servicers to offer loan modifications to borrowers experiencing a COVID-19 related hardship based on an evaluation of an incomplete application if specified criteria are met.
Establishes Temporary COVID-19 Loss Mitigation Procedural Safeguards (Amends Section 1024.41)
The final rule establishes temporary special COVID-19 loss mitigation procedural safeguards to ensure that a borrower has a meaningful opportunity to pursue loss mitigation options. From August 31, 2021, through December 31, 2021, unless an exception applies, a servicer must meet at least one of the specified safeguards before initiating any judicial or non-judicial foreclosure process where a borrower became more than 120 days delinquent on or after March 1, 2020, and the applicable state statute of limitations regarding foreclosures expires on or after January 1, 2022.
If you have questions about the information in this Regulatory Alert, please contact the NCUA’s Office of Consumer Financial Protection at 703.518.1140 or ComplianceMail@ncua.gov. You can also contact your NCUA regional office or state supervisory authority.
Todd M. Harper
1 Regulation X implements the Real Estate Settlement Procedures Act at 12 CFR 1024 (opens new window) (You will be leaving NCUA.gov and accessing a non-NCUA website. We encourage you to read the NCUA's exit link policies. (opens new page).) . The final rule’s changes will not appear in the version of Regulation X at this link until the effective date. To see the changes prior to August 1, 2021, you should use the link to the Enclosure to this Regulatory Alert.
2 Servicer means a person responsible for the servicing of a federally related mortgage loan (including the person who makes or holds such loan if such person also services the loan). 12 CFR 1024.2(b).
3 A small servicer, as defined in Regulation Z, 12 CFR 1026.41(e)(4), includes a servicer that, together with any affiliates, services 5,000 or fewer mortgage loans for which the servicer or an affiliate is the creditor or assignee. Small servicers are generally exempt from Regulation X mortgage servicing requirements,12 CFR 1024.30(b)(1).