Comment Intake
Bureau of Consumer Financial Protection
1700 G Street NW
Washington, DC 20552
Submitted electronically via email: 2021-NPRM-COVID-Mortgage-Servicing@cfpb.gov
Re: CFPB Rulemaking, Protections for Borrowers Affected by the COVID-19 Emergency Under the Real Estate Settlement Procedures Act (RESPA), Regulation X; 86 FR 18840
To Whom It May Concern:
The Center for Capital Markets Competitiveness (“CCMC”) appreciates the opportunity to submit comments to the Consumer Financial Protection Bureau (“Bureau”) regarding its proposed rule regarding protections for borrowers affected by the COVID-19 emergency under the Real Estate Settlement Procedures Act (RESPA).1 We share the Bureau’s goal of helping homeowners avoid foreclosure as the country emerges from the COVID-19 pandemic. We welcome the Bureau’s engagement with stakeholders on this important topic and its openness to making further adjustments through the rulemaking process.
We agree that it is critically important to help homeowners avoid foreclosure. Forbearance and loss mitigation programs are extremely valuable tools. They enable many homeowners to cure delinquencies, continue to build wealth, and stay in their homes. Foreclosure is a tool of last resort: not only because of its obvious impact on the affected borrower, but also because it is a costly and time-consuming process for all parties. As a result, lenders and servicers have been working hard to help lessen the impact of the COVID-19 pandemic on American homeowners, including through effective forbearance programs. These efforts have seen significant success. Indeed, the Bureau, drawing on Black Knight market data, reports that forbearance programs have worked for over half of the American borrowers who entered them since the beginning of the pandemic.2While the economic impact of the pandemic remains enormous for countless families and communities, we are glad that these programs have been able to lessen the damage it has caused. We urge the Bureau to build upon the success of these programs and stand ready to work with the Bureau to continue helping American homeowners stay in their homes.
We also recognize, however, that the mortgage market is both exceptionally complex and critical to our nation’s overall financial health. Diverse stakeholders are governed by complicated regulatory frameworks and the marketplace is supported by countless contractual agreements, whether between servicers and sub-servicers, investors and servicers, or other market participants. Any regulatory action in the mortgage market consequently bears heightened risks of unintended consequences, both because of the complexity of the market and the potentially substantial impact of any regulatory misstep.
Regulatory changes that make it more difficult to service loans, for example, may end up raising the cost of credit across the market or reduce access to credit. Similarly, changes that artificially extend consumer delinquency could make it harder for a consumer to sell their home outside of foreclosure, or could unduly elevate their credit score, distorting future lending decisions by feeding inaccurate information into underwriting decisions, which will exacerbate the issue at hand. Likewise, delaying inevitable foreclosures can strip borrower equity and frustrate ongoing work by banks and community leaders to support neighborhood regeneration, leading instead to increased blight within low-income communities. Such delay also would restrict supply of affordable housing, an issue that has already become a crisis in many communities around the country and that hurts American families who otherwise would be able to advance along the path of wealth creation. As these and other examples reflect, it consequently is critical for any regulatory action in the mortgage market to be carefully considered and grounded in a strong factual and legal basis. To the extent that such changes are made on an urgent basis, it also is important that the Bureau plan to address any regulatory uncertainty or unintended consequences that arise, and ensure that it puts in place a well-considered plan to phase out these temporary programs.
We consequently write to emphasize three points:
- The Bureau should focus its proposal on COVID-19 related hardships and provide exemptions under appropriate circumstances.
- The Bureau should address any unforeseen implementation challenges and regulatory uncertainty that results from its rulemaking.
- The Bureau should consider how it will eventually phase out this program so as to avoid a “foreclosure cliff” or undue turmoil within the marketplace.
