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  • Agencies instruct servicers to pause foreclosures while HAF assistance is available

    Federal Issues

    On May 6, the Secretaries of HUD, Department of Veterans Affairs, Department of Agriculture, and Treasury announced that servicers of federally-backed mortgages should pause pending foreclosure proceedings while assistance is available under the Homeowner Assistance Fund (HAF). President Biden’s American Rescue Plan established HAF to provide approximately $10 billion in financial support for families affected by the Covid-19 pandemic. According to the announcement, pausing pending proceedings is considered “a vital step towards keeping families in their homes as they receive assistance through the HAF program and is consistent with Congress’s intent in putting in place the HAF program to protect vulnerable homeowners.” The Secretaries encourage homeowners and servicers to continue collaborating on loss mitigation options so that homeowners eligible for assistance can choose “the best path to staying in their homes and fully utilize available resources.” They also “strongly encourage servicers to offer these loss mitigation options to borrowers who are struggling to make their mortgage payments, including those who are eligible for HAF funding.” The announcement further noted that, among other things, Treasury is urging HAF program administrators to ensure that their programs expedite handling of applications from homeowners with pending foreclosure proceedings, and to develop expedited procedures for handling homeowners with immediate threats to housing stability, in addition to supporting homeowners who may benefit from the agencies’ loss mitigation options.

    Federal Issues Covid-19 HUD Department of Veterans Affairs Department of Agriculture Department of Treasury Loss Mitigation Foreclosure Mortgages American Rescue Plan Act of 2021 Consumer Finance

  • HUD announces Massachusetts disaster relief

    Federal Issues

    On April 20, HUD announced disaster assistance for certain areas in Massachusetts impacted by a severe winter storm from January 28 to January 29. The disaster assistance follows President Biden’s major disaster declarations on April 18. According to the announcement, HUD is providing an automatic 90-day moratorium on foreclosures of FHA-insured home mortgages for covered properties effective April 18 and is making FHA insurance available to victims whose homes were destroyed or severely damaged, such that “reconstruction or replacement is necessary.” HUD’s Section 203(k) loan program enables individuals who have lost homes to finance a home purchase or to refinance a home to include repair costs through a single mortgage. The program also allows homeowners with damaged property to finance the repair of their existing single-family homes. Furthermore, HUD is allowing administrative flexibilities to community planning and development grantees, as well as to public housing agencies and Tribes.

    Federal Issues HUD Disaster Relief Mortgages Consumer Finance FHA Foreclosure

  • FHFA suspends foreclosure for borrowers applying for HAF funds

    Federal Issues

    On April 6, FHFA announced that servicers with mortgages backed by Fannie Mae and Freddie Mac are required to suspend foreclosure activities for up to 60 days if the servicer is notified that a borrower has applied for mortgage assistance under the Treasury Department’s Homeowner Assistance Fund (HAF). As previously covered by InfoBytes, the HAF was created to provide direct assistance for mortgage payments, property insurance, utilities, and other housing-related costs to help prevent delinquencies, defaults, and foreclosures after January 21, 2020.

    Federal Issues FHFA Fannie Mae Freddie Mac Mortgages Foreclosure Consumer Finance Mortgage Servicing

  • District Court denies defendants summary judgment over FCA violations

    Courts

    On March 16, the U.S. District Court for the Eastern District of Texas denied a motion for summary judgment by a mortgage servicer relating to False Claims Act (FCA) claims alleging false certifications of compliance to obtain payment under three different government programs: Treasury’s Home Affordable Modification Program (HAMP), FHA HAMP, and VA HAMP. According to the memorandum opinion and order, the relator, a former loss-mitigation specialist at the mortgage servicer, alleged that the mortgage servicer engaged in widespread dual tracking, continuously moving homeowners’ mortgages through the foreclosure process even as the defendants were supposed to be evaluating the mortgages for loss mitigation options and HAMP. The plaintiff further alleged that “the dual tracking led many homeowners to lose their homes in foreclosure when foreclosure should have been suspended during the resolution of modification and other workout processes,” and that the defendants “knowingly lacked adequate HAMP systems, processes, staffing, and training.”

    The defendants argued that, “notwithstanding industrywide difficulties, publicly available service assessments and third-party reviews show that [the mortgage servicer was] one of the highest-rated servicers participating in HAMP []. Further, though Treasury had the power to withhold incentives for HAMP non-compliance, Treasury never did so and consistently paid HAMP incentive payments to [the mortgage servicer] until the program expired.” The mortgage servicer also argued that summary judgment was appropriate for several reasons; (i) the court lacks jurisdiction to consider any of the relator’s claims under the FCA’s first-to-file bar; (ii) the relator’s claims fail because he cannot establish one or more of the required elements as to each claim; and (iii) the relator’s VA claim fails because the he cannot cite to any evidence of a certification by the mortgage servicer to the VA, and thus cannot demonstrate a false statement or fraudulent conduct. The court held that, pursuant to Fifth Circuit precedent, the first-to-file rule is inapplicable here because this case was filed by the same relator in a New York district court. With respect to the remaining claims, the court held that summary judgment is inappropriate where, as here, there exist genuine issues of material fact.

    Courts FCA Mortgages Mortgages Servicing Loss Mitigation Consumer Finance Foreclosure HAMP Department of Treasury FHA Department of Veterans Affairs

  • HUD announces disaster relief for homeowners in several states

    Federal Issues

    On March 16, HUD announced disaster assistance for certain areas in Virginia and Tennessee (see here and here) impacted by severe winter storms. The disaster assistance follows President Biden’s major disaster declarations on March 11. According to the announcements, HUD is providing an automatic 90-day moratorium on foreclosures of FHA-insured home mortgages for covered properties and is making FHA insurance available to victims whose homes were destroyed or severely damaged, such that “reconstruction or replacement is necessary.” HUD’s Section 203(k) loan program enables individuals who have lost homes to finance a home purchase or to refinance a home to include repair costs through a single mortgage. The program also allows homeowners with damaged property to finance the repair of their existing single-family homes. Furthermore, HUD is allowing administrative flexibilities to community planning and development grantees, as well as to public housing agencies and Tribes. 

    On March 18, HUD announced disaster assistance for certain areas in Maine impacted by a severe storm and flooding. The disaster assistance follows President Biden’s major disaster declarations on March 15. According to the announcements, HUD is providing an automatic 90-day moratorium on foreclosures of FHA-insured home mortgages for covered properties and is making FHA insurance available to victims whose homes were destroyed or severely damaged, such that “reconstruction or replacement is necessary.” HUD’s Section 203(k) loan program enables individuals who have lost homes to finance a home purchase or to refinance a home to include repair costs through a single mortgage. The program also allows homeowners with damaged property to finance the repair of their existing single-family homes. Furthermore, HUD is allowing administrative flexibilities to community planning and development grantees, as well as to public housing agencies and Tribes.

    Federal Issues Disaster Relief HUD Tennessee Virginia Consumer Finance FHA Foreclosure Mortgages

  • CFPB reminds servicers to use HAF funds to prevent foreclosure

    Federal Issues

    On March 14, the CFPB published a blog post strongly encouraging mortgage servicers to participate in the Homeowner Assistance Fund (HAF) to help borrowers avoid foreclosure and resolve delinquencies. While participation is voluntary, the Bureau reminded servicers that it remains focused on preventing avoidable foreclosures, and HAF funds can only help “if mortgage servicers work with state housing finance agencies and HUD-approved housing counselors to help borrowers” complete the process. HAF funds may allow borrowers to pay down the amount owed on a mortgage and help them enter loan modifications with lower payments. The Bureau also encouraged servicers to offer HAF program training to customer service representatives to ensure borrowers are provided accurate information about the loss mitigation process. Additionally, servicers should maintain policies and procedures that are designed to properly evaluate loss mitigation applications and should review existing policies and procedures to ensure borrowers are not improperly referred to foreclosure, especially in cases where a borrower’s HAF application is pending, or a borrower is awaiting HAF funds. The Bureau reminded servicers that it will continue to closely monitor servicer conduct and review mortgage servicing complaints to ensure compliance with all applicable federal consumer financial laws.

    Federal Issues CFPB Mortgages Consumer Finance Mortgage Servicing Foreclosure

  • 5th Circuit says bank and mortgage servicer did not engage in “dual tracking”

    Courts

    On December 15, the U.S. Court of Appeals for the Fifth Circuit affirmed summary judgment in favor of defendants in a mortgage foreclosure action. According to the opinion, after the plaintiff fell behind on his mortgage payments, the defendant bank’s mortgage servicer approved him for a trial loan modification plan that required timely reduced payments for a period of three months. The plaintiff stated that he complied with the trial plan but that the defendant bank nevertheless foreclosed on his property and sold the property to a third defendant. The plaintiff further claimed that he did not learn about the sale of his property until two months after it happened when the third defendant sought to evict him. The plaintiff sued the bank and mortgage servicer for violating RESPA and the Texas Debt Collection Act (TDCA), and sued the purchaser of the property “asserting claims to quiet title and for trespass to try title.” All defendants moved for summary judgment, which the district court granted based on evidence that refuted each allegation. The plaintiff appealed.

    On appeal, the 5th Circuit first reviewed, among other claims, the plaintiff’s RESPA claim, which alleged the bank and mortgage servicer engaged in “dual tracking” by initiating foreclosure proceedings while the plaintiff’s trial modification plan was purportedly still active. According to the court, dual tracking occurs when “the lender actively pursues foreclosure while simultaneously considering the borrower for loss mitigation options.” The appellate court agreed with the district court’s conclusion that summary judgment was appropriate because the plaintiff did not submit his first payment by the deadline established under the trial modification plan, and thus “did not timely accept the Trial Modification Plan.” As such, the bank and mortgage servicer did not engage in “dual tracking” because there was no obligation to notify the plaintiff of any denial of a permanent loan modification or to provide an opportunity to appeal, and accordingly was not considering the plaintiff for loss mitigation options. The court also found deficiencies in the plaintiff’s Texas law and TDCA claims.

    Courts Appellate Fifth Circuit RESPA Consumer Finance Mortgages State Issues Mortgage Servicing Foreclosure

  • OCC reports on mortgage performance

    Federal Issues

    On December 10, the OCC reported that 95.6 percent of first-lien mortgages were current and performing at the end of the third quarter of 2021—an increase from 92.5 percent at the end of the third quarter of 2020. According to the report, seriously delinquent mortgages declined from 3.8 percent in the prior quarter (5.8 percent a year ago) to 3.1 percent. In the third quarter of 2021, servicers initiated 925 new foreclosures, which is a 56.3 percent increase from the previous quarter and an increase of 150.7 percent compared to a year ago. The OCC noted that events related to the pandemic, such as foreclosure moratoriums, “significantly affected these metrics.” Additionally, mortgage modifications decreased 14.8 percent from the prior quarter. Of the reported 33,721 mortgage modifications, 59.6 percent reduced borrowers’ pre-modification monthly payments, while 98.3 percent were “combination modifications” that “included multiple actions affecting affordability and sustainability of the loan, such as an interest rate reduction and a term extension.”

    Federal Issues OCC Bank Regulatory Mortgages Foreclosure Consumer Finance Covid-19

  • Agencies end Covid mortgage servicing flexibility

    Federal Issues

    On November 10, the OCC, Federal Reserve Board, CFPB, FDIC, NCUA, and state financial regulators issued a joint statement announcing the end to temporary supervisory and enforcement flexibility provided to mortgage servicers due to the Covid-19 pandemic by the agencies’ April 3, 2020 joint statement. As previously covered by InfoBytes, the April 2020 joint statement provided mortgage servicers greater flexibility to provide CARES Act forbearance of up to 180 days and other short-term options upon the request of borrowers with federally backed mortgages without having to adhere to otherwise applicable rules. The April 2020 joint statement also announced that agencies would not take supervisory or enforcement action against mortgage servicers for failing to meet certain timing requirements under the mortgage servicing rules provided that servicers made good faith efforts to provide required notices or disclosures and took related actions within a reasonable time period.

    The agencies noted in their announcement that while the pandemic continues to affect consumers and mortgage servicers, servicers have had sufficient time to take measures to assist impacted consumers and develop more robust business continuity and remote work capabilities. Accordingly, the agencies “will apply their respective supervisory and enforcement authorities, when appropriate, to address any noncompliance or violations of the Regulation X mortgage servicing rules that occur after the date of this statement.” However, the agencies will take into consideration, when appropriate, “the specific impact of servicers’ challenges that arise due to the COVID-19 pandemic and take those issues in account when considering any supervisory and enforcement actions,” including factoring in the time it may take “to make operational adjustments in connection with this joint statement.”

    The same day, the Bureau released a report titled Mortgage Servicing Efforts in Response to the Covid-19 Pandemic, summarizing efforts taken by the Bureau since the start of the pandemic to respond to the evolving needs of homeowners and CFPB-supervised entities. These responses include: (i) conducting prioritized assessments and targeted supervisory reviews; (ii) issuing reminders to servicers that being “unprepared is unacceptable”; (iii) implementing temporary procedural safeguards to allow borrowers time to explore options before foreclosure; (vi) analyzing consumer complaint data and conducting targeted reviews of high-risk complaints related to pandemic forbearances; (v) analyzing and releasing information relating to mortgage servicers’ pandemic responses; (vi) documenting research on the pandemic’s disproportionate impact on Black, Hispanic, and low-income communities; and (vii) partnering with other federal agencies to create online tools to provide information on CARES Act assistance and protections, as well as providing homeowner outreach materials. The Bureau noted it “will continue to monitor closely the performance of mortgage servicers to prevent avoidable foreclosures to the maximum extent possible and will not hesitate to take supervisory or enforcement action if warranted.”

    Federal Issues CFPB OCC FDIC Federal Reserve NCUA Covid-19 Mortgages Mortgage Servicing Foreclosure Regulation X State Issues CARES Act Consumer Finance

  • OCC reports improved mortgage performance

    Federal Issues

    On September 28, the OCC reported that 95 percent of first-lien mortgages were current and performing at the end of the second quarter of 2021—an increase from 91.1 percent at the end of the second quarter of 2020 (the first full quarter of the Covid-19 pandemic). According to the report, seriously delinquent mortgages declined from 4.6 percent in the prior quarter (6.8 percent a year ago) to 3.8 percent. During the second quarter of 2021, servicers initiated 592 new foreclosures—a 28.9 percent decrease from the prior quarter but a 137.8 percent increase from a year ago. The OCC noted that events related to the pandemic, such as foreclosure moratoriums, “significantly affected these metrics.” Additionally, mortgage modifications decreased 17.1 percent from the prior quarter. Of the reported 39,599 mortgage modifications, 53.3 percent reduced borrowers’ pre-modification monthly payments, while 97.2 percent were “combination modifications” that “included multiple actions affecting affordability and sustainability of the loan, such as an interest rate reduction and a term extension.”

    Federal Issues OCC Mortgages Covid-19 Foreclosure Bank Regulatory

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