Letter to CFPB on the Proposed Rule to Amend Regulation X's Mortgage Servicing Provisions for Borrowers Experiencing Payment Difficulties

To Whom it May Concern:

The American Bankers Association (ABA) appreciates the opportunity to comment on the Consumer Financial Protection Bureau's (CFPB or Bureau) proposed rule to amend Regulation X's mortgage servicing provisions for borrowers experiencing payment difficulties. ABA appreciates the Bureau's efforts to "simplify and streamline the existing mortgage servicing rules."

The CFPB proposes to amend the loss mitigation framework to include procedural safeguards, remove the anti-evasion provision and allow for sequential review, revise certain early intervention and determination notice requirements, expand the notice of error and appeals provisions, and create new language access requirements for certain default servicing communications in languages other than English. The proposal also requests comments on various servicing issues. While some of these proposed amendments would support the Bureau's objectives, many others could have the opposite effect, potentially hindering the effectiveness of mortgage servicing, increasing operational burdens, and ultimately harming borrowers and servicers.

Summary of the Comments

Background. Regulation X's current mortgage servicing framework, established in 2013, was promulgated by the CFPB in response to the 2007 foreclosure crisis. During the crisis, the Department of the Treasury introduced the Home Affordable Modification Program (HAMP), which provided struggling borrowers with permanently reduced mortgage payments and certain foreclosure protections. The HAMP application process was extensive, requiring borrowers to submit many documents for evaluation, such as proof of financial hardship, income tax returns, bank statements, and pay stubs. Additionally, HAMP introduced several protections for distressed borrowers, including safeguards against "dual-tracking," which refers to the practice of accepting and reviewing loss mitigation applications while simultaneously moving forward with foreclosure proceedings. HAMP represented a pivotal step toward standardizing default servicing practices. These safeguards, along with the documentation requirements and provisions from the National Mortgage Settlement, became the foundation for the 2013 Mortgage Servicing Rule.

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