The CFPB and FHFA Are Closely Monitoring Your Treatment of Affected Borrowers
Just when you thought that federal agencies were softening their stance on enforcement during the crisis, the Consumer Financial Protection Bureau (CFPB) and the Federal Housing Finance Agency (FHFA) took a figurative shot across the bow.
What happened
The FHFA and CFPB have announced a joint initiative, the Borrower Protection Program, to enable CFPB and FHFA to share servicing information in order to address whether mortgage servicers are doing enough to protect borrowers during the COVID-19 pandemic emergency.
Under the program, the 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.
As conservator to Fannie and Freddie, and in its role as regulator of the Federal Home Loan Banks, the FHFA provides more than $6.3 trillion in funding for the U.S. mortgage market. In response to COVID-19, the FHFA directed the government-sponsored enterprises (GSEs) to offer borrowers with a pandemic-related financial hardship a forbearance plan or other loss mitigation solution. Despite these pronouncements, the FHFA left it to mortgage servicers to work with borrowers on the specifics.
As a more direct conduit to consumers, the CFPB has itself pursued numerous steps to protect and assist consumers during the pandemic, including making it easier for consumers to receive pandemic relief payments; informing consumers about their options as relating to mortgage forbearance; ensuring consumers will be able to continue to send remittance transfers without disruption; releasing a policy statement outlining the responsibility of credit reporting companies and furnishers; and providing needed flexibility to enable financial companies to work with customers in need.
The CFPB already maintains a complaint portal to monitor consumer concerns. With the COVID-19 crisis, pandemic-related complaints are now a significant part of the mix. The CFPB is processing consumer complaints through that system, and mortgage servicers are already responding to those complaints through the portal.
Why it matters
The FHFA is now playing an outsize role in determining which Fannie/Freddie-dependent companies survive the current crisis. By injecting itself directly into the process, the FHFA is making known its interest in the way mortgage lenders and servicers handle borrowers during the crisis. And if the FHFA decides to punish those sellers and servicers by refusing them access to the billions in liquidity otherwise available, that could spell doom for these companies. News articles suggest the FHFA is already engaged in this process, including by declining to inject critical capital into the companies that depend on the GSEs for survival.
Manatt’s consumer financial services team is currently advising a number of lenders on COVID-19-related issues, including with respect to the CFPB and FHFA. If you require assistance or have any questions, please contact Richard Gottlieb, Charles E. Washburn, Jr., or any member of the team.