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Federal Register / Vol. 86, No. 16 / Wednesday, January 27, 2021 / Notices furnishing, debt collection, deposits, prepaid cards, and small business lending.3
3.1

Mortgage Servicing
Market Response to Consumers &
Industry Challenges The CARES Act established certain protections for homeowners. For example, for borrowers with federally backed mortgages, borrowers have the right to request and obtain forbearance for up to 180 days and to request and obtain an extension for another 180 days for a total of 360 days. Since March 2020, millions of borrowers have sought payment relief options and enrolled in CARES Act forbearances.4
Servicers faced a number of significant challenges. Beginning in March 2020, they had to quickly implement the CARES Act and make other operational changes in light of evolving investor guidance. Servicers reported taking a variety of steps to address issues related to the pandemic and enroll borrowers into CARES Act forbearances. Many servicers reported operational constraints, resource burdens, and service interruptions.
Many servicers also moved employees from other duties to respond to forbearance requests. Some servicers reported disruptions to normal CMS and monitoring processes.
Consumer Risk Examiners review of mortgage servicers PA responses indicated several issues that raise the risk of consumer harm. Some categories of issues are described below.

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Providing Incomplete or Inaccurate Information to Consumers About Forbearance Several servicers provided incomplete or inaccurate information to consumers regarding CARES Act forbearances.
These issues present a range of potential risks of consumer harm, such as dissuading borrowers from requesting a forbearance and causing borrowers to pursue other options that may be less 3 This document does not impose any new or different legal requirements. In addition, the risks described in this issue of Supervisory Highlights are based on the particular facts and circumstances reviewed by the Bureau as part of its PA work. A
conclusion that elevated risk to consumers exists is based on the facts and circumstances described here and may not lead to such a finding under different facts and circumstances.
4 According to the Mortgage Bankers Association, an estimated 2.7 million borrowers were in forbearance plans as of December 2020. Mortgage Bankers Association. December 21, 2020. MBA:
Share of Mortgage Loans in Forbearance Increases to 5.49 Percent, available at: https www.mba.org/
2020-press-releases/december/share-of-mortgageloans-in-forbearance-increases-to-549-percent.

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favorable to them than forbearance.
Examiners observed instances of the following:
Customer service representatives provided inaccurate information regarding forbearances, including the available period for CARES Act forbearances and the interest accrued or amounts owed. Servicers told some borrowers that lump sum payment of all missed monthly payments would be required at the end of the forbearance period, when in fact that was not correct.
Representatives indicated that only delinquent borrowers could qualify for a forbearance, contrary to the CARES
Act.5 As a result, representatives instructed some current borrowers to call back to request forbearance only after they had failed to make an on-time monthly payment.
Written materials, such as forbearance approval letters and customer service websites, included inaccurate or potentially misleading information regarding CARES Act forbearance. For example, one servicer suggested that consumers had to pay a fee to receive a forbearance and another provided incorrect due dates for the borrowers next payment.
A servicer sent borrowers requesting CARES Act forbearances written agreements purporting to require a signature as a condition of enrollment and stating that payments would be due later that month, when in fact they would not be due for 90 or 180
days. The CARES Act requires only that borrowers request a forbearance and attest to a financial hardship due to the pandemic to qualify.
Sending Collections and Default Notices, Assessing Late Fees, and Initiating Foreclosures for Borrowers Enrolled in Forbearance Several servicers took actions on borrowers accounts that were erroneous or inconsistent with the fact that borrowers were enrolled in CARES Act forbearances. These issues present risks of direct financial harm and significant confusion for borrowers who were enrolled in forbearances. For example, some servicers sent automated collection notices to borrowers in CARES Act forbearances indicating that their accounts were past due, and that negative reporting and late fees could result. While collection notices may be required for FHA loans by regulation under some circumstances, they are not required for other loans and may result 5 The CARES Act states that borrowers may request forbearance regardless of delinquency status. See CARES Act, section 4022b1.

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in confusion for consumers enrolled in CARES Act forbearances. In other cases, system issues resulted in erroneous late fees and default notices for borrowers enrolled in forbearances. Examiners also identified one servicer that erroneously initiated foreclosure actions in violation of the CARES Acts moratorium on foreclosures and assessed related fees on borrowers in the early weeks of the pandemic.6
Cancelling or Providing Inaccurate Information About Borrowers Preauthorized Electronic Funds Transfers Several servicers provided inaccurate information or took actions concerning borrowers preauthorized electronic funds transfers without their knowledge or consent. These issues can result in inadvertent missed payments and other negative consequences for consumers.
Due to manual data entry errors, representatives at one servicer cancelled borrowers preauthorized electronic funds transfers when they inquired about forbearance options over the phone. In addition, at other servicers, representatives provided inaccurate information to borrowers by stating that they did not need to take steps to cancel their preauthorized electronic fund transfers when they enrolled in forbearance, when in fact they did.
Failing To Timely Process Forbearance Requests Many servicers experienced delays in processing forbearance requests in the early months of the pandemic. These delays were generally brief. However, a few servicers experienced more serious delays or failed to process forbearance requests. As a result, this issue presents a risk to consumers who do not timely receive the benefit of a requested forbearance and experience negative consequences, such as missed payments and negative credit reporting. For example, representatives processing borrower requests for forbearance incorrectly used a code indicating only that the borrowers inquired about forbearance, and no forbearance was processed.
Enrolling Borrowers in Automatic or Unwanted Forbearances Many servicers enrolled borrowers in automatic or unwanted forbearances.
Examiners observed the following:
Certain servicers did not effectively communicate to borrowers that they were applying for a forbearance. In some cases, borrowers believed that they were 6 The CARES Act placed a moratorium on certain foreclosures. See CARES Act, section 4022.

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