Spring 2021 Federal Highlights

New URLA Mandatory Beginning March 1

Fannie Mae and Freddie Mac (“the GSE’s”) have redesigned the Uniform Residential Loan Application (“URLA”) and, accordingly, created new file formats for submissions to Desktop Underwriter/Loan Product Adviser.

The redesigned URLA is mandatory for all new loan applications started on or after
March 1, 2021. While the GSE’s have not set forth specific requirements for determining a loan application’s start date, they have indicated that lenders should be consistent in making this determination. To accommodate loans that were started before March 1, but not submitted until after March 1, the GSE’s automated underwriting systems will continue to accept loan data in the old format until May 1, 2021. After May 1, loans submitted in the old format will not be accepted.

CFPB Delays Mandatory Compliance Date of General QM Final Rule

On April 30, 2021, the Consumer Financial Protection Bureau (“CFPB”) finalized a rule delaying the mandatory compliance date of the General Qualified Mortgage (“QM”) Final Rule issued in December 2020. The new mandatory compliance date is October 1, 2022.

The CFPB adopted a rule in December that, among other changes, revised the definition of “General QM” by replacing the 43% limit on debt-to-income ratio with a limit based on the price of the loan. The rule was effective on March 1, 2021, meaning that for applications received on or after March 1, 2021, creditors have the option of complying with either the previous General QM definition or the revised General QM definition. The rule is mandatory on July 1, 2021, meaning that only the revised General QM definition is available for applications received on or after July 1, 2021.

The CFPB has now delayed the mandatory compliance date until October 1, 2022. Creditors now have the option of complying with either the previous General QM definition or the revised General QM definition for any application received on or after March 1, 2021, and before October 1, 2022. Only the revised General QM definition would be available for applications received on or after October 1, 2022.

CFPB Issues Interpretive Rule Clarifying that Sexual Orientation and Gender Identity Are Protected Characteristics Under ECOA and Reg B

On March 9, 2021, the Consumer Financial Protection Bureau (“CFPB”) issued an interpretive rule clarifying that the prohibition against discrimination based on “sex” in the Equal Credit Opportunity Act and Regulation B includes discrimination based on sexual orientation and gender identity. The final rule will be effective immediately upon its publication in the Federal Register.

CFPB Rescinds Seven Policy Statements Relating to COVID Flexibilities

On March 31, 2021, the Consumer Financial Protection Bureau (“CFPB”) announced that it is rescinding seven policy statements that were issued to provide temporary flexibilities to financial institutions during the pandemic. The rescinded policy statements include:

• Statement on Bureau Supervisory and Enforcement Response to COVID-19
Pandemic (March 26, 2020)

• Statement on Supervisory and Enforcement Practices Regarding Quarterly Reporting Under the Home Mortgage Disclosure Act (March 26, 2020)

o This rescission instructs all financial institutions that are required to file quarterly data under the Home Mortgage Disclosure Act to do so beginning with their 2021 first quarter data, due on or before
May 31, 2021, for all covered loans and applications with a final action taken date between January 1 and March 31, 2021.

• Statement on Supervisory and Enforcement Practices Regarding the Fair Credit Reporting Act and Regulation V in Light of the CARES Act (April 1, 2020)

o The CFPB is not rescinding the portion of this statement that relates to the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act’s requirement that creditors report as current certain credit obligations for which they have offered payment relief due to the pandemic. The CFPB continues to state that it does not intend to cite in examinations or take enforcement actions against those who furnish information to consumer reporting agencies that accurately reflects the payment relief measures they are employing.

• Statement on Supervisory and Enforcement Practices Regarding Regulation Z Billing Error Resolution Timeframes in Light of the COVID-19 Pandemic
(May 13, 2020).

The rescissions generally provide that moving forward, the CFPB intends “to exercise its supervisory and enforcement authority consistent with the Dodd-Frank Act and with the full authority afforded by Congress consistent with the statutory purpose and objectives of the Bureau.”

Finally, the CFPB also rescinded Bulletin 2018-01 and replaced it with Bulletin 2021-01, “Changes to Types of Supervisory Communications.” The new bulletin states that the CFPB will continue to convey supervisory expectations using Matters Requiring Attention (“MRA’s”) and will no longer issue formal, written Supervisory Recommendations (“SR’s”).

The rescissions were effective April 1, 2021.

Fannie Mae and Freddie Mac Provide Updates on Purchases of GSE Patch Loans and Loans Secured by Second Homes or Investment Properties

Earlier this year, the Federal National Mortgage Association (“Fannie Mae”) and the Federal Home Loan Mortgage Corporation (“Freddie Mac”) (collectively, “the GSE’s”) entered into a letter agreement with the Treasury Department that amended certain provisions of their Preferred Stock Purchase Agreement (“PSPA”). The amended PSPA requires the GSE’s to limit purchases of certain loans. In connection with these limitations, the GSE’s recently made the following announcements.

GSE Patch Loans

Both Fannie Mae and Freddie Mac have announced that “GSE Patch” Loans will no longer be eligible for purchase. To be eligible for purchase, loans must meet the “Revised QM” definition in the CFPB’s ATR/QM Rule (if the loan is otherwise subject to the ATR/QM Rule). Please note that loans meeting the previous “General QM” definition, but not the Revised QM definition, will not be eligible for purchase, regardless of the extended mandatory compliance date of the ATR/QM Rule.

The effective dates of these changes are as follows: To be eligible for purchase to Fannie Mae, GSE Patch Loans must (1) have application dates on or before June 30, 2021, and (2) be purchased as whole loans on or before Aug. 31, 2021, or in MBS pools with an issue date on or before Aug. 1, 2021. For Freddie Mac, the change is effective for mortgages with application received dates on or after July 1, 2021, and all mortgages with settlement dates after August 31, 2021.

While the PSPA generally prohibits the GSE’s from acquiring government loans, there is an exception for Rural Development Section 502 loans, HUD Section 184 loans, and FHA/VA loans. Such loans will remain eligible for purchase, although Fannie Mae has said that it is not actively negotiating for the purchase of FHA/VA loans at this time.

Loans Secured by Second Homes and Investment Properties

The PSPA also requires the GSE’s to limit purchases of loans secured by second homes and investment properties. The GSE’s have therefore revised their guidelines under which such loans will be eligible for purchase.

CFPB Issues Servicing Compliance Bulletin

On April 7, 2021, the Consumer Financial Protection Bureau (“CFPB”) issued a bulletin discussing its supervision and enforcement priorities “regarding housing insecurity in light of heightened risks to consumers needing loss mitigation assistance in the coming months as the COVID-19 foreclosure moratoriums and forbearances end.”

The Bulletin discusses the CFPB’s expectations for servicers’ engagement with borrowers regarding loss mitigation and forbearance options, and also highlights seven areas that the CFPB “plans to pay particular attention to,” including:

• Whether servicers are providing clear and readily understandable information to borrowers about their options for payment assistance;
• Whether servicers are complying with the outreach requirements in Regulation X to ensure that borrowers are getting needed information about loss mitigation options;
• Whether servicers are complying with the Equal Credit Opportunity Act’s (ECOA’s) prohibition against discriminating against any applicant, with respect to any aspect of a credit transaction;
• Whether servicers promptly handle loss mitigation inquiries and avoid unreasonably long hold times on phone lines; for example, the Bureau plans to scrutinize servicer conduct where hold times are significantly longer than industry averages;
• Whether servicers maintain policies and procedures that are reasonably designed to achieve the continuity of contact objectives to ensure that delinquent borrowers receive accurate information about their loss mitigation options;
• For borrowers who submit complete loss mitigation applications, whether servicers evaluate the applications consistent with the Regulation X requirements to promote timely and consistent evaluations;
• Whether servicers comply with foreclosure restrictions in Regulation X and other Federal or State foreclosure restrictions; and
• Whether servicers are complying with the Fair Credit Reporting Act’s requirements to report the credit obligation or account appropriately.

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