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Mortgage Servicing: CFPB Issues Guidance to Mortgage Servicers on “Right to Forbearance” Provision o Mortgage Servicing: CFPB Issues Guidance to Mortgage Servicers on “Right to Forbearance” Provision o

Mortgage Servicing: CFPB Issues Guidance to Mortgage Servicers on “Right to Forbearance” Provision of CARES Act

The Consumer Financial Protection Bureau (CFPB) and the Conference of State Bank Supervisors issued guidance to mortgage servicers regarding compliance with the “right to forbearance” provisions of the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act.

Under the CARES Act, borrowers who have federally-backed mortgages are entitled to forbearance of their loans under certain conditions. Federally-backed mortgages include mortgages purchased or securitized by Fannie Mae, Freddie Mac, the Department of Housing and Urban Development, Department of Veteran Affairs, or the Department of Agriculture. Mortgage servicers must provide forbearance to borrowers who request it and who attest that the financial hardship was caused by COVID-19. More information on a mortgage servicer’s duty to provide forbearance is available here.

As provided under the CARES Act, mortgage servicers can offer short-term payment forbearance options or short-term repayment plans for borrowers facing financial hardships. If a borrower requests forbearance and attests to financial hardship relating to COVID-19, the mortgage servicer must provide a forbearance allowing borrowers to defer their mortgage payments for up to 180 days or longer, if the circumstances allow. The CARES Act forbids mortgage servicers from requiring additional information from the borrower before granting the forbearance; the borrower must simply attest that its financial hardships are a result of COVID-19. Further, if the initial forbearance period is less than the minimum 180-day forbearance set out in the CARES Act, the mortgage servicer must extend the forbearance at the borrower’s request up to the initial 180-day period and must extend the forbearance period for an additional 180 days upon request. Mortgage servicers are also prohibited from steering borrowers away from the requested forbearance and providing limited repayment options when other options are reasonably available.

Mortgage servicers may risk allegations of causing consumer harm and may face legal penalties for asking borrowers to provide additional documentation relating to financial hardship, delaying forbearance to borrowers once requested, or steering borrowers away from the forbearance option. More information on this joint statement is available here.

If you have any questions, please contact Ice Miller’s Financial Services Litigation team.

This publication is intended for general information purposes only and does not and is not intended to constitute legal advice. The reader should consult with legal counsel to determine how laws or decisions discussed herein apply to the reader’s specific circumstances.
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