The Consumer Financial Protection Bureau and Conference of State Bank Supervisors have issued a joint statement regarding forbearance as it relates to the CARES Act.
The three-page statement defines protections for borrowers with federally backed mortgages. Under the terms of the guidance, servicers must grant forbearance after receiving a request from a borrower citing financial hardship caused by the COVID–19 emergency.
While servicers cannot request information supporting the need for forbearance, the new joint statement declared they could “work with the borrower to better understand the borrower’s situation so long as (i) borrowers are not misled about the requirements of, or dissuaded from proceeding with, a CARES Act forbearance if they have a COVID-related hardship and (ii) any information obtained from the borrower has no bearing on the servicer’s provision of a CARES Act forbearance.”
The forbearance period can last as long as two consecutive 180-day periods, and the statement advised servicers that they could “grant forbearance in separate, shorter increments than the 180-day period with borrower consent, but must extend those shorter periods unless agreed by the borrower with no further borrower attestation required.”
Servicers cannot make the determination that a borrower meeting the conditions for a CARES Act forbearance is ineligible to receive this assistance, nor can servicers limit the amount of the forbearance that is given – even if the borrower is in delinquency.
The joint statement also warned servicers about enacting additional interest, fees or penalties “beyond the amounts scheduled or calculated as if the borrower made all contractual payments on time and in full under the terms of the mortgage contract.”
Servicers were also warned against steering borrowers away from forbearance requests.
“Examiners will evaluate communications between borrowers and their servicers, including the servicer’s communication of repayment options for legal compliance or resulting consumer harm,” the statement said. “A servicer that offers very limited repayment options when others are reasonably available could depending on the facts and circumstances, be at risk of legal violation or causing consumer harm.”