CFPB Releases Loss Mitigation Principle

The Consumer Financial Protection Bureau (CFPB) released a document that outlines their principles to provide a framework for discussion about the future of loss mitigation.  While the document does not establish binding legal requirements, these principles are intended to compliment ongoing discussion among industry, consumer groups, and government on the development of loss mitigation programs.

The four principles are Accessibility, Affordability, Sustainability, and Transparency.

Accessibility

  • Consumers can easily obtain and use information about loss mitigation options and application procedures from their servicers.
  • Consumers can submit a request for loss mitigation using a common and readily available form of application in order to expedite consideration and to better enable housing counselors and others to support consumers in the loss mitigation process.
  • Consumers are asked to submit only documentation necessary to enable consideration for available options, and servicers make appropriate efforts to obtain and verify information within the servicer’s control.
  • Consumers have ready access to individuals, including housing counselors and others, who can help them seek loss mitigation and understand the effect of the terms they are being offered.
  • Consumers’ requests for loss mitigation assistance are responded to timely and effectively by servicers.
  • Consumers have access to clear and effective escalation options.
  • Consumers are considered for appropriate loss mitigation options from imminent default through late stages of delinquency.
  • Consumers who are similarly situated receive fair and equal consideration for loss mitigation options within similar timeframes.
  • Servicers should generally be aware of and consider how they will meet the needs of those with limited English proficiency.

Affordability

  • When repayment plans and modifications are offered, they are generally designed to produce a payment and loan structure that is affordable for consumers.
  • Modifications for consumers with hardships provide a meaningful payment reduction.
  • Loss mitigation options are flexible enough to assist special populations (e.g., pre-crisis subprime loans) or unique circumstances (e.g., disasters).
  • Consumers are not required to pay upfront costs or fees to obtain a loss mitigation option from their servicer.

Sustainability

  • The loss mitigation option offered is designed to resolve the delinquency.
  • Deficiency balances are not imposed on consumers experiencing hardship as a condition of a short sale or deed-in-lieu on their principal residence.
  • When modification options are used, they are designed to provide affordability throughout the remaining or extended loan term.
  • Where trial modifications are used, successful trials are converted to permanent modifications timely and efficiently.
  • Servicers and investors should consider modification options that reduce principal when doing so may benefit the investor, unless prohibited by statute.
  • Loss mitigation options are defined and made available for consumers who decline a loan modification offer.
  • Loss mitigation options are available for borrowers who re-default.
  • Loss mitigation outcomes are monitored by servicers and investors to determine their impact on re-default rates, and program terms are adjusted to achieve effective outcomes and respond to economic conditions.

Transparency

  • All terms (e.g., deferred interest, future rate or term changes, and repayment of forbearance amounts) are clearly described in a manner consumers can understand. Plain language should be used to the extent reasonably feasible.
  • Key loss mitigation vocabulary, e.g., hardship, imminent default, streamlined modification, etc., and data standards are defined and used consistently by mortgage servicers and investors.
  • Consumers get clear, concise information and rationales about loss mitigation decisions.
  • Consumers are not required to sign broad waivers of rights as a condition of receiving loss mitigation assistance.
  • Key loss mitigation data is reported publicly on a regular basis to ensure that loss mitigation programs are effectively meeting consumer and market needs.

Compliance Question of the Week

Are we supposed to give a member a copy of the CTR we are filing just because they want one

There is no rule by FinCEN that mandates a credit union give a copy of the CTR to the affected member. The credit union does have several options:

  • Give the member a copy of the CTR
  • Give the member a blank CTR
  • Show the member the completed CTR, but do not provide a copy
  • Develop a policy of not giving out copies of CTRs
  • Develop a policy of giving out copies of CTRs
  • Direct the member to the FinCEN website for additional information

It is important to remember that a SAR cannot be disclosed to the member and a copy should never be provided to the member.

Related Links:

FinCEN CTR Pamphlet

FinCEN Guidance

Legal Briefs

National Credit Union Administration (NCUA)

The NCUA is hosting two upcoming webinars. On Wednesday, August 10th the NCUA is hosting a webinar on the effective use of social media. On Thursday, August 18th the NCUA is hosting a webinar on the revised interest risk rate supervision procedures.

Consumer Financial Protection Bureau (CFPB)

The CFPB announced that it has updating the Mortgage Servicing Rules to provide greater protection for borrowers. The final rule provides greater protection for successors in interest, providers more information for borrowers in bankruptcy and updates the loss mitigation rules.

The CFPB published a notice and request for comment in the Federal Register aimed at gathering information that will help improve the current complaint process.

Federal Reserve Board (FRB)

The FRB, OCC, and FDIC announced information to their regulated financial institutions on how they may begin to submit self-assessments of their diversity policies and practices.

The FRB, along with the OCC, FDIC, FHFA, and FCA finalized a rule that exempts certain commercial and financial end users from initial and variation margin requirements.

The FRB, jointly with the FDIC and OCC, released the most recent Shared National Credit program review. The review found that risks remain high, but the underwriting and risk management strategies used have improved.

The FRB released the July 2016 Senior Loan Officer Opinion Survey on Bank Lending Practices. Among other things, the survey indicated that banks tightened their standards on commercial and industrial loans as well as commercial real estate loans during the 2nd quarter of 2016.

The FRB published the August issue of FedFocus. This month’s issue includes information on the FRBs conversion to a new internal cash transactional system.

Federal Deposit Insurance Corporation (FDIC)

The FDIC published a notice and request for comment regarding its Guidelines for Appeals of Material Supervisory Determinations.

Office of the Comptroller of the Currency (OCC)

The OCC issued a new booklet of the Comptroller’s Handbook. The new booklet, Corporate and Risk Governance, updates, consolidates and rescinds some of the previous booklets issued that address this topic including Management Information Systems, Risk Management and Insurance, and Employee Benefits.

Federal Housing Finance Agency (FHFA)

The FHFA issued its annual report on single-family guarantee fees charged by Fannie Mae and Freddie Mac.

Federal Financial Institutions Examination Council (FFIEC)

The FFIEC announced that it is seeking comments on a streamlined call report for small institutions (defined as those with only domestic offices and under $1 billion in assets).

Office of Foreign Assets Control (OFAC)

OFAC has updated the SDN list as of August 4, 2016. The last update prior to this was August 3, 2016.

Questions? Contact the Compliance Hotline: 1.800.546.4465, compliance@nwcua.org

Posted in Compliance, Federal.