31 March 2020 COVID-19: Impact on Consumer Financial ...

31 March 2020

Practice Group: Financial Institutions and Services Litigation

COVID-19: Impact on Consumer Financial Service Providers

U.S. Federal Government

Home Mortgage Loans (Mortgage Servicing, Foreclosure, and Eviction) Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") (March 27, 2020)

? Forbearance for federally-backed mortgage loans: Borrowers of certain federally backed mortgage loans may request up to a 180-day payment forbearance without additional fees, penalties, or interest beyond the regular amounts scheduled or calculated for regular payments. Borrowers may request up to an additional 180 days of forbearance (up to 360 days of total forbearance).

? Foreclosure moratorium: Federally-backed mortgage loan servicers shall not initiate foreclosures (judicial and non-judicial) or conduct foreclosure sales or foreclosure-related evictions until after May 17, 2020. The Act provides an exception for vacant and abandoned properties.

? Eviction moratorium: Starting March 27, 2020 and extending for 120 days, landlords are prohibited from initiating legal action to recover possession of a rental unit or to charge fees, penalties, or other charges to the tenant related to nonpayment of rent where the landlord's mortgage on that property is insured, guaranteed, supplemented, protected, or assisted in any way by HUD, Fannie Mae, Freddie Mac, the rural housing voucher program, or the Violence Against Women Act of 1994.

? Credit reporting: Beginning January 31, 2020 and extending to the later of 120 days after March 27, 2020 or 120 days after the date the national emergency declaration is terminated, furnishers of information to credit reporting agencies who provide account forbearance or agree to modified payments for a consumer account impacted by COVID-19, should report such account as "current" or as the status reported prior to the accommodation during the period of accommodation unless the consumer becomes current (so long as the consumer satisfies all requirements of the forbearance or modification agreement).



COVID-19: Impact on Consumer Financial Service Providers

Federal Home Loan Mortgage Corp. ("Freddie Mac") ? Bulletin 2020-7: Servicing Requirements and Relief Related to COVID-19 (March 25, 2020) and Bulletin 20204: Temporary Servicing Requirements Related to COVID-19 (March 18, 2020) Federal National Mortgage Association ("Fannie Mae") ? Lender Letter 2020-02: Impact of COVID-19 on Servicing (March 25, 2020)

? For mortgages owned by Freddie Mac and Fannie Mae: Several relief options are now in place for homeowners who are directly or indirectly impacted by COVID-19, provided the homeowner's ability to make timely mortgage payments has been negatively affected as a result of COVID-19.

? Foreclosure moratorium: Suspension of foreclosure sales for 60 days (through May 17, 2020).

? Credit reporting suspension: No credit reporting for homeowners on an active forbearance plan, repayment plan, or trial period plan as a result of COVID-19related hardship where the borrower is making the required payments as agreed, even though payments are past due.

? Forbearance plan eligibility: COVID-19-related hardships that have impacted the borrower's ability to make monthly mortgage payments are considered eligible forbearance hardships under existing agency guidance, and a hardship may include unemployment, reduction in regular work hours, or illness (of borrower or dependent family member) o No documentation is required to verify the hardship; and o Forbearance plans for up to 12 months, suspension of late charges and penalties, available regardless of property type (primary home, second home, investment property).

? Loan modifications: Mortgage loan modifications must be considered near conclusion of forbearance plan term. Servicers are to evaluate COVID-19 borrowers for modifications under existing Extend Modification and Cap and Extent Modification requirements. See Bulletin 2017-25 at ; see LL-2017-09R at . Evaluation requirements updated for COVID-19 are located in Bulletin 2020-4 and LL-2020-02.

Additional details regarding Fannie Mae and Freddie Mac COVID-19 updates can be found in the links above and below.



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COVID-19: Impact on Consumer Financial Service Providers

Interagency: Consumer Financial Protection Bureau ("CFPB"), Office of the Comptroller of the Currency ("OCC"), Board of Governors of the Federal Reserve System ("FRB"), Federal Deposit Insurance Corporation ("FDIC"), National Credit Union Administration ("NCUA") ? Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus (March 22, 2020)

? Encourages servicers to "work prudently with borrowers who are or may be unable to meet their contractual payment obligations" due to the effects of COVID-19. The agencies:

o View loan modification programs as positive actions; o Will not criticize institutions for working with borrowers; o Will not direct supervised institutions to automatically categorize all COVID-

19-related loan modifications as troubled debt restructurings ("TDRs"); o Will not criticize financial institutions that mitigate credit risk through

prudent actions consistent with safe and sound practices; and o Will not criticize institutions that work with borrowers as part of a risk

mitigation strategy intended to improve an existing nonpass loan.

? Short-term modifications made on a good-faith basis in response to COVID-19 to borrowers who were current prior to any relief are not TDRs, including short-term (e.g., six months) modifications such as payment deferrals, fee waivers, extensions of repayment terms, or other delays in payment that are insignificant;

? The agencies' examiners will exercise judgment in reviewing loan modifications, including TDRs, and will not automatically adversely risk rate credits that are affected by COVID-19, including those considered TDRs. Regardless of whether modifications result in loans that are considered TDRs or are adversely classified, agency examiners will not criticize prudent efforts to modify the terms on existing loans to affected customers.

? The FRB, the FDIC, and the OCC note that efforts to work with borrowers of one to four family residential mortgages, where the loans are prudently underwritten, and not past due or carried in nonaccrual status, will not result in the loans being considered restructured or modified for the purposes of their respective risk-based capital rules.

? For loans not otherwise reportable as past due: o Financial institutions are not expected to designate loans with deferrals granted due to COVID-19 as past due because of the deferral.

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COVID-19: Impact on Consumer Financial Service Providers

o A loan's payment date is governed by the due date stipulated in the legal loan documents. If a financial institution agrees to a payment deferral, this may result in no contractual payments being past due, and these loans are not considered past due during the period of the deferral.



CFPB: Statement on Bureau Supervisory and Enforcement Response to COVID-19 Pandemic (March 26, 2020)

? The CFPB will work with financial institutions to schedule examinations and supervisory activities in a manner "to minimize disruption and burden."

? In scheduling examinations and supervisory activity, the CFPB will: o Cooperate with institutions to determine when supervisory events can be appropriately scheduled; o Consider staffing and related resource challenges confronting the institutions and their counsel; o Encourage prudent efforts undertaken in good faith, which are designed to meet the current needs of an institution's borrowers and other customers; o Consider the circumstances that entities face as a result of the COVID-19 pandemic; and o Be sensitive to good-faith efforts designed by institutions to assist consumers.



CFPB: Statement on Supervisory and Enforcement Practices Regarding Quarterly Reporting Under the Home Mortgage Disclosure Act (March 26, 2020)

? To provide mortgage lenders with "flexibility" and to "reduce administrative burden," the CFPB has stated that: o Until further notice, the CFPB will not "cite in an examination" or "initiate an enforcement action" based on a failure by any financial institution to submit the Quarterly reporting required by the Home Mortgage Disclosure Act ("HMDA"), 12 U.S.C. 2801, et seq. and Regulation C, 12 C.F.R. ? 1003.5(a)(1)(ii).

? Institutions should continue collecting and recording HMDA data for future, likely annual, data submissions.



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COVID-19: Impact on Consumer Financial Service Providers

Interagency: CFPB; OCC; Board of Governors of the FRB; FDIC; NCUA ? Joint Statement Encouraging Responsible Small-Dollar Lending in Response to COVID-19 (March 26, 2020)

? Encourage financial institutions to offer responsible small-dollar loans to consumers and small businesses, including, for example, through: o open-end lines of credit; o closed-end installment loans; or o other appropriately structured single payment loans.

? Encourage financial institutions to consider workout strategies to enable borrowers unable to repay a loan as structured to repay the principal of the loan while reducing the need to re-borrow.



U.S. Department of Housing and Urban Development ? Mortgagee Letter 2020-04: Foreclosure and Eviction Moratorium in Connection with the PresidentiallyDeclared COVID-19 National Emergency (March 18, 2020)

? For all properties secured by Federal Housing Administration ("FHA")-insured single-family mortgages (FHA loans):

o 60-day foreclosure moratorium ? applies to initiation and completion of foreclosures;

o 60-day eviction suspension; and

o Deadlines of the first legal action and reasonable diligence timelines are extended by 60 days



U.S. Department of Veterans Affairs ("VA") ? Circular 26-20-7: Special Relief for those Potentially Impacted by COVID-19 (March 16, 2020); Circular 26-20-8: Foreclosure Moratorium for Borrowers Affected by COVID19 (March 16, 2020)

? Forbearance ? "Encourages" lenders and servicers to extend forbearance to borrowers in distress as a result of COVID-19, as well as waive late chargers, and suspend credit reporting.

? Foreclosure Moratorium ? "Strongly encourages" loan holders "to establish a sixty-day moratorium beginning March 18, 2020, on completing pending foreclosures or initiating new foreclosures on loans."

? Eviction ? Loan holders to consider the impact of completing an eviction when choosing to retain property instead of conveying it to the VA. "VA requests

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COVID-19: Impact on Consumer Financial Service Providers

holders not expose Veterans and their families to additional risk through an eviction action, if at all feasible."



U.S. Department of Housing and Urban Development ? Dear Lender Letter 202004: Foreclosure and Eviction Moratorium in Connection with the Presidentially Declared COVID-19 National Emergency (March 20, 2020)

? For all Sections 184 (Indian Home Loan Guarantee Program) or 184A (Native Hawaiian Housing Loan Guarantee Program) guaranteed loans and properties secured thereunder:

o Moratorium on foreclosure for a period of 60 days from the date of issuance. The moratorium applies to the initiation of foreclosures and to foreclosures in process.

o Evictions of persons from such properties where the lender has acquired title are also suspended for a period of 60 days from the date of issuance.

o Deadlines of the first legal action and reasonable diligence time lines are extended by 60 days from the date of issuance



Credit Cards and Prepaid Accounts

CFPB: Statement on Supervisory and Enforcement Practices Regarding Bureau Information Collections for Credit Card and Prepaid Account Issuers (March 26, 2020)

? To provide financial institutions with "more flexibility" and to "reduce administrative burden[s]" on issuers of credit cards and prepaid accounts, until further notice, the CFPB will not "cite in an examination" or "initiate an enforcement action" based on a failure by any financial institution to submit the following reporting: o Annual submission of information concerning agreements between credit card issuers and institutions of higher education, as required by the Truth in Lending Act ("TILA"), 15 U.S.C. ? 1637(r), and Regulation Z, 12 C.F.R. ? 1026.57(d)(3); o Quarterly submission of consumer credit card agreements, as required by TILA, 15 U.S.C. ? 1632(d)(2) and Regulation Z, 12 C.F.R. ? 1026.58(c); o Collection of certain credit card price and availability information from a sample of credit card issuers under TILA, 15 U.S.C. ? 1646(b)(1) et seq.; and o Submission of prepaid account agreements and related information required by Regulation E, 12 C.F.R. ? 1005.19(b).

? The CFPB further advises that entities should maintain records to allow them to make delayed submissions under future CFPB guidance.

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COVID-19: Impact on Consumer Financial Service Providers



Student Loans Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") (March 27, 2020)

? U.S. Department of Education ("DOE") will suspend payments due for federal student loans through September 30, 2020.

? Interest will not accrue on federal student loans through September 30, 2020. ? DOE will treat suspended payments through September 30, 2020 as regularly

scheduled payments for reporting to consumer reporting agencies. ? DOE will suspend all involuntary collection related to federal student loans.



U.S. Department of Education ("DOE") ? Press Release: Secretary DeVos Directs FSA to Stop Wage Garnishment, Collections Actions for Student Loan Borrowers, Will Refund More Than $1.8 Billion to Students, Families (March 25, 2020)

? DOE will halt collections actions and wage garnishments for defaulted student loan accounts for at least 60 days beginning on March 13, 2020 (March 13?May 12, 2020).

? DOE will instruct private collections agencies to halt all proactive collection activities, including making phone calls to borrowers and issuing collection letters and billing statements.

? DOE will monitor employers' compliance with garnishment of wages stoppage.

DOE ? Press Release: Delivering on President Trump's Promise, Secretary DeVos Suspends Federal Student Loan Payments, Waives Interest During National Emergency (March 20, 2020)

? 60-Day 0 Percent Interest ? Borrowers with a federally held student loan will automatically have their interest rates set to 0 percent for a period of at least 60 days

? Payment Suspension Option ? Borrowers will have the option to suspend their payments for at least two months, without accruing any interest

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COVID-19: Impact on Consumer Financial Service Providers

? Loan Forbearance ? DOE directed all federal student loan servicers to grant an administrative forbearance to any borrower with a federally held loan who requests one, which will last for at least 60 days, beginning on March 13, 2020

? Automatic suspension of payments for any borrower more than 31 days delinquent as of March 13, 2020, or whomever becomes more than 31 days delinquent



Authors:

David E. Fialkow david.fialkow@ +1.617.261.3126 Brian M. Forbes brian.forbes@ +1.617.261.3152 Robert W. Sparkes, III robert.sparkes@ +1.617.951.9134 Edward J. Mikolinski edward.mikolinski@ +1.617.951.9067

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