Coronavirus Aid, Relief, and Economic Security Act becomes Law – H.R. 748
President Trump signed H.R. 748, known as the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”). The CARES Act addresses many issues and applies to many persons, businesses and services, one of those being lenders and financial institutions providing consumer financial services. The provisions noted below include the sections of the CARES Act most relevant to lenders and financial institutions.
Generally, the provisions went into effect upon the President’s signature on March 27, 2020. However, many of the requirements impose look-back periods and/or specific periods of applicability.
Section 4003. Emergency Relief and Taxpayer Protections. Provides $454 billion to make loans and loan guarantees to programs or facilities established by the Board of Governors of the Federal Reserve System. This is to provide liquidity to the financial system that supports lending to eligible businesses, States, or municipalities by:
(1) purchasing obligations or other interests directly from issuers of such obligations or other interest;
(2) purchasing obligations or other interest in secondary markets or otherwise; or
(3) making loans, including loans or other advances secured by collateral.
Section 4011. Temporary Lending Limit Waiver. Amends the United States Code to temporarily include any nonbank financial company (as defined in 12 USC 5311), in the exemption of lending limitations based on capital and surplus to loans or extensions of credit approved by the Comptroller of the Currency. This section is effective as of the date of enactment (March 27, 2020), and terminates at the sooner of the termination of the national emergency declared on March 13, 2020 or December 31, 2020.
Section 4021. Credit Protection During COVID-19. Amends the Fair Credit Reporting Act to require special reporting of consumer credit of persons affected by COVID-19 – essentially, a furnisher of credit must report the account of a consumer that performs under an “accommodation” as current.
Specifically, an accommodation is an agreement to defer one or more payments, make a partial payment, forbear any delinquent amounts, modify a loan or contract, or any other assistance or relief granted to a consumer affected by the COVID-19 pandemic.
Where an account is granted an accommodation, the furnisher of credit is required to report the account as current. If the account was delinquent prior to accommodation, the furnisher must maintain the delinquent status, unless a consumer brings the account current during the accommodation, at which point the furnisher must report the account current.
This reporting is applicable to accommodations entered into beginning on January 31, 2020 and ending 120 days after the enactment of the CARES Act or 120 days after the national emergency concerning COVID-19 terminates, whichever is later.
Section 4022. Foreclosure Moratorium and Consumer Right to Request Forbearance.
Foreclosure Moratorium –
A servicer of a Federally backed mortgage loan may not initiate any judicial or non-judicial foreclosure process, move for a foreclosure judgment or order of sale, or execute a foreclosure-related eviction or foreclosure sale beginning on March 18, 2020 for no less than 60 days (May 17, 2020).
Consumer Right to Request Forbearance –
A borrower with a Federally backed mortgage loan experiencing a financial hardship due, directly or indirectly, to the COVID-19 emergency may request forbearance during the covered period. To make the request, the borrower must submit the request to his/her servicer and affirm he/she is experiencing a financial hardship during the COVID-19 emergency.
The forbearance shall last for 180 days, and if requested by the borrower, extended for an additional 180 days. During this time, no fees, penalties, or interest shall accrue beyond the amounts scheduled or calculated as if the borrower made all payments timely and in full.
A servicer is obligated to provide the borrower forbearance for the 180 days (and a possible extension) upon receipt of the borrower’s request, with no additional documentation except the borrower’s attestation to financial hardship caused by the COVID-19 emergency.
For purposes of Section 4022, “Federally backed mortgage loan” includes any loan which is secured by a first or subordinate lien on residential real property (including individual units of condominiums and cooperatives) designed principally for the occupancy of 1-4 families that is: (a) insured by the Federal Housing Administration under title II of the National Housing Act; (b) insured under section 255 of the National Housing Act; (c) guaranteed under section 184 or 184A of the Housing and Community Development Act of 1992; (d) guaranteed or insured by the Department of Veterans Affairs; (e) guaranteed or insured by the Department of Agriculture; (f) made by the Department of Agriculture; (g) purchased or securitized by the Federal Home Loan Mortgage Corporation or the Federal National Mortgage Association.
Section 4023. Forbearance of Residential Mortgage Loan Payments for Multifamily Properties with Federally Backed Loans.
A multifamily borrower with a Federally backed multifamily mortgage loan that was current on payments as of February 1, 2020, may submit to the servicer an oral or written request for forbearance, affirming financial hardship during the COVID-19 emergency. A servicer that receives the oral or written request for forbearance shall: (a) document the financial hardship; (b) provide the forbearance for up to 30 days; and (c) extend the forbearance up to two additional 30-day periods at the borrower’s request, which must be made during the covered period and at least 15 days prior to the end of the forbearance period.
A multifamily borrower that receives forbearance may not: (1) for the duration of forbearance, evict or initiate eviction of a tenant solely for nonpayment of rent or other fees or charges, or charge any late fees, penalties, or other charges to a tenant for late payment of rent; (2) require a tenant to vacate a unit in the applicable property (the property against which the loan is secured) until at least 30 days after the borrower provides the tenant with a notice to vacate, and may not issue a notice to vacate until after the expiration of the forbearance.
This section applies to “Federally backed multifamily mortgage loans,” which includes any loan: (a) secured by a first or subordinate lien on residential multifamily property designed for occupancy of 5 or more families, including a loan used to prepay or pay off an existing loan secured by the same property; and (b) is made in whole or part, or insured, guaranteed, supplemented, or assisted in any way, by an officer or agency of the Federal Government or in connection with a housing or urban development program administered by the Secretary of Housing and Urban Development, or any other such officer or agency, or purchased or securitized by the Federal Home Loan Mortgage Corporation or Federal National Mortgage Association.
Section 4024. Temporary Moratorium on Eviction Filings.
For a 120-day period, effective on the date of enactment (March 27, 2020), the lessor of a covered dwelling may not initiate a legal action to recover possession for nonpayment of rent or other fees or charges, or charge fees, penalties or other charges to the tenant related to the nonpayment of rent. The lessor may not require the tenant to vacate the covered dwelling until at least 30 days after the lessor provides the tenant with a notice to vacate, and may not issue a notice to vacate until after the expiration of the 120-day period.
COVID-19 Resources for Borrowers
As a result of COVID-19, many borrowers are facing difficult times and lenders and servicers are working to guide borrowers through available options. The Federal Trade Commission (“FTC”) and Consumer Financial Protection Bureau (“CFPB”) have each provided a resource where consumers can find information on mortgage relief options.
The FTC issued “Coronavirus and your mortgage,” which provides borrowers an explanation of available mortgage relief under the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act, and helps borrowers walk through the steps to determine if their loan qualifies for the relief. Similarly, the CFPB shared a “Guide to coronavirus mortgage relief options.” Both the FTC and CFPB resources explain “forbearance” and “moratorium,” warn borrowers against scammers, and recommend questions a borrower should ask their loan servicer in navigating through this process.
CFPB Issues Final Rule on HMDA Reporting Thresholds
The Consumer Financial Protection Bureau (“Bureau”) passed a final rule on the thresholds for reporting data under The Home Mortgage Disclosure Act (“HMDA”).
Specifically, the Bureau amended Regulation C to increase the threshold for reporting information on closed-end mortgage loans from 25 to 100 originated loans in each of the prior two years. The Bureau also finalized the permanent threshold for open-end lines of credit from 100 to 200 originated loans in each of the prior two years, effective January 1, 2022, to take the place of the current temporary threshold of 500, which expires in 2021.
Once effective, the rules are as follows:
(1) Effective July 1, 2020, institutions originating less than 100 closed-end mortgage loans in either of the two preceding years are not required to report the data.
(2) Effective January 1, 2022, institutions originating less than 200 open-end lines of credit in either of the two preceding years are not required to report the data.
Institutions newly excluded at the July 1, 2020 effective date must continue to collect HMDA data until July 1, 2020 and must record closed-end mortgage loan data for the first quarter of 2020 on their loan application registers within 30 days of the end of the first quarter. However, the newly excluded institutions are not required to report the HMDA data. If the institutions choose to report the data, they must do so for the entire year of 2020.
Fannie Mae and Freddie Mac Issued Guidance On The Use of Remote Online Notarizations
Fannie Mae and Freddie Mac issued guidance on the use of Remote Online Notarizations in certain enumerated states, which includes specific standards.
Fannie Mae Issued Guidance on Remote Ink-Signed Notarizations
Fannie Mae issued guidance on Remote Ink-Signed Notarizations (RIN), which provides temporary flexibilities for closing processes using RIN. The guidance provides minimum standards lenders are encouraged to follow.