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MortgageServicing

Regulators done playing nice with mortgage servicers

Temporary flexibility in supervision and enforcement given due to the Covid-19 pandemic is no longer valid

The federal government’s top regulators announced Wednesday that they are collectively resuming mortgage servicing supervisory and enforcement practices in full, ending certain flexibilities it offered mortgage servicers at the onset of the Covid-19 pandemic.

The announcement comes as servicers negotiate with over one million borrowers exiting forbearance plans. Servicers are now expected to fully comply with the rules spelled out in Regulation X, which protects consumers when they apply for and have mortgage loans, the regulators said.

In April 2020, the agencies said they would not take action against servicers for failing to meet certain timing requirements in the regulation – for example, a five-day acknowledgment notice in loss mitigation cases – so long as servicers made good-faith efforts, took the related actions, and helped borrowers within a reasonable period of time.

“Servicers have had sufficient time to adjust their operations by taking steps to work with consumers affected by the Covid-19 pandemic and developing more robust business continuity and remote work capabilities,” the agencies said in a statement.

The joint statement includes the Board of Governors of the Federal Reserve, the Consumer Financial Protection Bureau (CFPB), the Federal Deposit Insurance Corporation, the National Credit Union Administration, the Office of the Comptroller of the Currency (OCC), and the state financial regulators.


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Servicers have negotiated strategies with over four million borrowers in the last 18 months, but around one million homeowners still have active forbearance plans.

According to the CFPB, with most of the remaining Covid-19 forbearances expected to expire before the end of the year, struggling homeowners need protection to avoid foreclosure.

Rohit Chopra, the director of the CFPB, said that servicers’ failures worsened the economic crisis a decade ago. “Regulators have learned their lesson, and we will be scrutinizing servicers to ensure they are doing all they can to help homeowners and follow the law,” he said in a separate statement.

In the joint statement, the agencies said they recognize the ongoing challenges mortgage servicers face, their efforts to assist borrowers and that it requires time to make operational adjustments in connection with the end of the flexibilities.

“The agencies will consider, when appropriate, the specific impact of servicers’ challenges that arise due to the COVID-19 pandemic and take those issues into account when considering any supervisory and enforcement actions.”

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