April 15, 2020
Authored by: Douglas Thompson
Today, the Federal Housing Finance Agency (FHFA) and the Consumer Financial Protection Bureau (CFPB) announced a joint program to assist borrowers experiencing financial hardship in connection with the COVID-19 pandemic. The Borrower Protection Program (BPP) augments a number of prior actions taken by the regulators in connection with and relating to the CARES Act.
According to the announcement, the BPP “enables CFPB and FHFA to share servicing information to protect borrowers during the coronavirus national emergency.” FHFA Director Mark Calabria added “Borrowers are entitled to accurate information about their forbearance options. This partnership with CFPB ensures FHFA can address misconceptions stemming from consumer complaints by working with Fannie and Freddie servicers.” This may be an early attempt to avoid confusion, consternation and often delay which impacted consumers as well as servicers seeking to understand what specific relief was available to which borrowers. Consumers and servicers alike will recall these challenges plagued the roll out of the TARP HAMP processes following the 2008 Financial Crisis, often exacerbated by media soundbites that did not communicate detail regarding program relief requirements. Even today’s press release reflects additional detail from FHFA: “The missed payments will have to be paid back by the borrower. The missed payments can be added to the normal monthly payments, paid back all at once, tacked on to the end of the loan, or the borrower can have the term of the loan extended.”
Analytical Tools and Complaint Information: The program itself will involve sharing of data between the two agencies: “CFPB will make complaint information and analytical tools available to FHFA via a secure electronic interface; and FHFA will make available to the Bureau information about forbearances, modifications and other loss mitigation initiatives undertaken by Fannie Mae and Freddie Mac (the Enterprises).” CFPB Director Kraninger has noted previously that she sees data analysis as a key focus of the Bureau.
In her testimony before the House Financial Services Committee in February 2020, Kraninger stated: “Complaints, along with other inputs, give us insight into people’s experiences in the marketplace that we analyze and use to improve our mission execution. The analysis helps us regulate consumer financial products and services under existing Federal consumer financial laws, enforce those laws judiciously, and educate and empower consumers to make informed financial decisions. The Bureau also publishes complaint data and reports on complaint trends annually in Consumer Response’s Annual Report to Congress.”
The CFPB website provides additional detail on how the Bureau processes consumer complaint information and the results of periodic analyses.
The FHFA website also has information attempting to address COVID-19 related consumer mortgage assistance requests.
A linked FAQ PDF document is available to consumers. Servicers and lenders may wish to familiarize themselves with these tools as consumers may refer to statements in the FAQ or from the websites in interactions with servicers. For consumers seeking additional “official” information or who may seek to “verify” servicer information, the CFPB or FHFA website content may be useful.
Servicer Customer Contact & Loss Mitigation Performance: Servicers and lenders also will need to be prepared for questions now and nearing the end of the CARES Act prescribed forbearance period, because the FHFA FAQ, for example, uses terminology which signals but does not outline specific additional requirements.
The FAQ response regarding how to enter in to a forbearance plan includes: “Servicers will review the homeowner’s situation to determine whether forbearance is appropriate. Homeowners do not need to provide extensive documentation to be placed in a forbearance plan.”
Similarly, the FAQ response regarding repayment includes: “Servicers will reach out to homeowners in forbearance about 30 days before the scheduled end of forbearance to determine which assistance program works best for the homeowner at that point – a repayment plan, loan modification, or an extension of the forbearance period if needed.“
Today’s announcement does not provide much detail regarding specifically what analyses or action plans will stem from the BPP. It does reference CFPB’s new CARES Act related initiatives including “student loan payment suspension; mortgage forbearance; stimulus payments; and the paycheck protection program.” So, presumably, the BPP will track customer complaint information and certain implementation metrics about each. Servicers and lenders should expect that both the CFPB and the FHFA will be tracking any emerging trends in consumer complaints, especially if they involve implementation of or exit from forbearance plans. And to the extent that staffing/personnel operational challenges arise as a result of high volumes of consumer contact, servicers should be prepared to present regulators with both the nature of the limitations and best efforts execution information, which CFPB Director Kraninger recently announced will be considered in the supervisory/enforcement context. Accordingly, servicers and lenders may want to consider how they historically have tracked customer contact response times and escalations to depict an accurate and compelling picture of their consumer assistance efforts.