Credit Reporting During the COVID-19 Outbreak: Fannie Mae and the VA Offer New GuidanceWe previously blogged about the push among lawmakers and regulators to encourage or force financial institutions to cease providing adverse credit reporting on consumer loans where the delinquency or default may be related to the outbreak of COVID-19. Given the rapidly changing environment, it is not surprising that there have been some material changes in the past two days.

On March 18, Fannie Mae issued a Lender’s Letter  directing servicers to suspend credit reporting “during an active forbearance plan, or a repayment plan or Trial Period Plan where the borrower is making the required payments as agreed, even though payments are past due, as long as the delinquency is related to a hardship resulting from COVID-19.” Similarly, the Veterans Administration has issued a bulletin directing servicers to suspend adverse credit reporting for “affected” loans. Servicers should follow Fannie Mae’s and the VA’s guidance as to any applicable loan where the servicer has a basis for believing the default or deficiency is related to the virus outbreak.

Mortgage servicers may want to consider implementing broader suppression policies that would cover loans that are delinquent or in default but for which the servicer has not received a request for forbearance or other indication that the delinquency or default is related to COVID-19. Such an approach would anticipate even more rigorous restrictions on adverse credit reporting, such as those envisioned in Representative Maxine Waters’s March 11 letter or in New York Governor Andrew Cuomo’s March 19 announcement indicating that any adverse credit reporting related to the failure to make a mortgage payment for the next 90 days would be suppressed. Each servicer will need to review its own system and assess whether suppressing reporting for all accounts would avoid inaccurate reporting without creating significant operational issues.

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Photo of R. Aaron Chastain R. Aaron Chastain

Aaron Chastain represents financial services institutions, healthcare companies, and other businesses in a broad range of litigation and compliance-related matters. Aaron has advised student loan and mortgage loan originators and servicers in complying with the complex universe of regulation and state lien laws…

Aaron Chastain represents financial services institutions, healthcare companies, and other businesses in a broad range of litigation and compliance-related matters. Aaron has advised student loan and mortgage loan originators and servicers in complying with the complex universe of regulation and state lien laws, as well as in handling finance-related litigation, such as claims for violations of the Fair Debt Collection Practices Act (FDCPA), wrongful foreclosure, violations of the Truth in Lending Act (TILA), and violations of the Real Estate Settlement Procedures Act (RESPA). He has specific experience advising clients in the realms of student and mortgage lending, servicing, and operations.

Photo of Grant A. Premo Grant A. Premo

Grant Premo represents financial services institutions and other businesses across the country in a variety of commercial litigation and compliance matters. He has experience advising clients on lending, servicing and operations in the areas of student lending and residential and commercial mortgage lending…

Grant Premo represents financial services institutions and other businesses across the country in a variety of commercial litigation and compliance matters. He has experience advising clients on lending, servicing and operations in the areas of student lending and residential and commercial mortgage lending, including helping develop best practices for telephone and text-message communications with consumers to comply with the Telephone Collection Practices Act (TCPA). Grant litigates matters involving state law tort and contract claims and claims of violations of federal and state laws, including the TCPA, Truth in Lending Act (TILA), Fair Debt Collection Practices Act (FDCPA), Fair Credit Reporting Act (FCRA), Real Estate Settlement Procedures Act (RESPA), Home Ownership and Equity Protection Act (HOEPA), the Servicemembers Civil Relief Act (SCRA), state unfair and deceptive trade practice statutes, government loan programs, and mortgage lending, servicing and securitization practices. Grant also assists financial services clients facing investigations and enforcement actions by an attorney general, the CFPB and other regulators.