The Federal Reserve Board (Fed) joined together with the Consumer Financial Protection Bureau (CFPB), NCUA, the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency to issue guidance relating to certain mortgage servicing practices. Specifically, the guidance addresses risks related to military homeowners who have informed their loan servicer that they have received Permanent Change of Station (PCS) orders and who might seek assistance with their mortgage loans. To access the full guidance, click here.
The guidance reminds mortgage loan servicers that their employees should be adequately trained about the options available for assisting military homeowners with PCS orders, and instructs servicers to provide accurate, clear and readily understandable information about available options for which the homeowner may qualify based on the information known, such as the Making Home Affordable Program and other programs offered through Fannie Mae, Freddie Mac, the Federal Housing Administration, the Department of Veteran’s Affairs, and the US Department of Agriculture’s Rural Development programs. Servicers should also communicate decisions on assistance requests in a timely manner.
The joint agencies have particular concerns about the following practices which have the potential to mislead or otherwise cause harm to homeowners with PCS orders:
• Failing to provide homeowners with PCS orders with accurate, clear, and readily understandable information about available assistance options for which the homeowner may qualify based on information known to the servicer. These options should be consistent with the servicer’s public representations and agreements with government agencies and others regarding the servicer’s intent to offer such assistance to all qualified homeowners;
• Asking homeowners with PCS orders to waive their legal rights under the Servicemembers Civil Relief Act or any other law as a prerequisite to the servicer either providing information to the homeowner about available options or evaluating the homeowner’s eligibility for assistance;
• Advising homeowners with PCS orders who are current on their loans and able to make the monthly payment to intentionally skip making payments in order to create the appearance that they are having financial difficulties in order to obtain assistance for which they would not otherwise qualify (providing accurate, factual information to a homeowner about a servicer’s loss mitigation programs for delinquent borrowers is acceptable, however);
• Failing to provide a reasonable means for homeowners with PCS orders to obtain information on the status of their request for assistance; and
• Failing to timely communicate the servicer’s decision regarding requests for assistance from homeowners with PCS orders and failing to include an explanation of the reason for the denial, where required, so that the homeowner has an opportunity to address any deficiencies, if applicable. Timeliness will be judged on all of the facts and circumstances.
Importantly, the agencies jointly expect financial institutions to maintain mortgage servicing policies and procedures appropriate to achieve the above listed objectives, commensurate with the institution’s customer base and the size and complexity of their operations.
While the guidance does not require servicers to offer any particular loss mitigation programs, if the agencies determine that a servicer has engaged in any acts or practices that are unfair, deceptive or abusive, or that otherwise violate Federal consumer financial laws and regulations, appropriate supervisory and enforcement actions will be taken to address violations that harm consumers, and appropriate corrective actions will be sought, including requiring the mortgage servicer to strengthen its programs and processes.