Addressing the CFPB’s 2021 Mortgage Servicing COVID-19 Final Rule and Gap

On June 28, 2021, the CFPB issued a final rule amending certain provisions in Regulation X regarding additional assistance for borrowers experiencing a COVID-19-related hardship.

The final rule temporarily adds to existing foreclosure protection conditions in certain circumstances. From August 31, 2021 through December 31, 2021, unless an exception applies, the servicer must make sure at least one of three temporary procedural safeguards has been met before referring certain 120-day delinquent accounts to foreclosure as follows:

1.     Borrower was evaluated based on a complete loss mitigation application and existing foreclosure protection conditions are met. To meet this safeguard, the servicer must confirm that:

a.     The borrower submitted a complete loss mitigation application and it was completely evaluated;

b.     The borrower remained delinquent since the application submission; and

c.      The foreclosure protections in the existing Mortgage Servicing Rules are met.

2.     The property is abandoned. To meet this safeguard, applicable state or local law determines whether a property is abandoned.

3.     Borrower is unresponsive to servicer outreach. To meet this safeguard, the servicer must not have received any communications from the borrower in the 90 days prior to the foreclosure referral. Per the Mortgage Servicing Rules, the servicer must confirm:

a.     Compliance with early intervention live-contact requirements during the period;

b.     Early intervention 45-day written notice required was provided and sent at least 10 days but no more than 45 days;

c.      Compliance with all loss mitigation requirements during the period; and

d.     Borrower forbearance, if applicable, ended at least 30 days before foreclosure referral.

Loss Mitigation Safeguard

In addition to our existing Loss Mitigation Quality Control process and current Default pre-foreclosure review, the Loss Mitigation Department is building a dedicated team to complete a second review of accounts removed or closed out of loss mitigation without a successful workout. This additional effort will be undertaken so that proper disposition of these loans occurred and all loss-mitigation efforts were exhausted prior to foreclosure referral.

Abandoned Properties Safeguard

Cenlar uses property inspection vendors that are subject matter experts on the local and jurisdictional requirements surrounding the identification and management of abandoned properties. If the property is determined to be vacant or abandoned, it is secured in accordance with all local rules and requirements.

In addition, a property inspection checklist is completed on every loan by our Default Compliance review team so that inspection results match system coding and that the inspection results determination is consistent with inspector feedback and photos. Any discrepancies are escalated to the property preservation team for review and the referral is held until resolved. The Homeowner Advocate team also performs these same activities as a secondary validation prior to final foreclosure referral determination.

Unresponsive Borrower Safeguard

To meet this safeguard’s requirement “the servicer must not have received any communications from the borrower in the 90 days prior to the foreclosure referral.” Cenlar does not intend to use this safeguard as it is worded too broadly and may add unnecessary risk. For example, potential scenarios include a borrower who called us and did not authenticate through our IVR, visited the website and used our Virtual Assistant or, perhaps, contacted you directly.

Addressing the Gap – August 1 through August 31, 2021

While the rule is effective on August 31, 2021, foreclosure moratoriums are scheduled to end on July 31, 2021.
This difference has opened a month-long gap between the end of the moratoriums and the effective date for the final rule. Cenlar will address the gap period by proceeding with our approach to the final rule as previously shared.

Please note there are two exceptions to the final rule:

1.     If the loan was more than 120-days delinquent prior to March 1, 2020; and

2.     If the foreclosure referral occurs on or after January 1, 2022 as the statute of limitations will expire before January 1, 2022.

Except as described above, we will proceed with foreclosure referral/resumption on loans where a CFPB stated exception exists. Cenlar will further proceed with foreclosure activities for accounts already determined to be ineligible for assistance, were seriously delinquent at the start of the pandemic, or are vacant or abandoned.