On November 10, 2021, the Board of Governors of the Federal Reserve, the Consumer Financial Protection Bureau, the Federal Deposit Insurance Corporation, the National Credit Union Administration, the Office of the Comptroller of the Currency, and state financial regulators issued a Joint Statement on Supervisory and Enforcement Practices Regarding the Mortgage Servicing Rules in Response to the Continuing COVID-19 Pandemic and CARES Act to advise mortgage servicers that the collective agencies were revoking the temporary supervisory and enforcement flexibility announced in their April 2020 Joint Statement.
As discussed in our blog on the April 2020 Joint Statement, the previous guidance advised that the agencies would not take supervisory and enforcement actions against servicers if they failed to meet certain timing requirements under the mortgage servicing rules so long as good faith efforts to provide required notices and disclosures were made.
The new Joint Statement advises that the temporary flexibility “is no longer necessary because servicers have had sufficient time to adjust their operations by, among other things, taking steps to work with consumers affected by the COVID-19 pandemic and developing more robust business continuity and remote work capabilities.” Therefore, going forward, “agencies will apply their respective supervisory and enforcement authorities, where appropriate, to address any noncompliance or violations of the Regulation X mortgage servicing rules that occur after the date of issuance of this statement.”
Importantly, a footnote in the Joint Statement notes that the new approach also relates to servicer violations of the Protections for Borrowers Affected by the COVID-19 Emergency Under the Real Estate Settlement Procedures Act (RESPA), Regulation X (86 FR 34848), which became effective on August 31, 2021.
The Joint Statement encourages servicers to continue their efforts to assist borrowers who are impacted by the ongoing COVID-19 pandemic. The agencies noted that they will “consider, when appropriate, the specific impact of servicers’ challenges that arise due to the COVID-19 pandemic and take those issues in account when considering any supervisory and enforcement actions.”
The only surprising thing about the new Joint Statement is that it took so long for it to be issued. The agencies – and in particular the Consumer Financial Protection Bureau – have been clear since early 2021 that “Unprepared is Unacceptable” and that previous latitude regarding supervision and enforcement was over.