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Servicers also remain obligated to make escrowed real estate tax and insurance payments to local taxing authorities and insurance companies. While servicers are required to hold liquid reserves to cover anticipated advances, early in the
pandemic there were significant concerns that higher-than-expected forbearance rates over an extended period of time could lead to liquidity shortages, particularly among many non-bank servicers. While forbearance
rates remain elevated at 5.22 percent for the week ending February 14, 2021, they have decreased since reaching their high of 8.55 percent on June 7, 2020.49
However, the rate of decline has begun to slow, as illustrated in Figure 2 below.

Because many mortgage servicers also originate the loans they service, many creditors, as well as several warehouse providers,50 initially responded to the risk of elevated forbearances and higherthan-expected monthly advances by imposing credit overlaysi.e., additional underwriting standardsfor new originations. These new underwriting standards included more stringent requirements for non-QM, jumbo, and government loans.51 An adverse market fee of 50 basis points on most refinances became effective for new originations delivered to the GSEs on or after December 1, 2020, to cover projected losses due to forbearances, the foreclosure moratoriums, and other default servicing expenses.52 However,
due to refinance origination profits resulting from historically low interest rates, the leveling off in forbearance rates, and actions taken at the Federal level to alleviate servicer liquidity pressure,53 concerns over non-bank liquidity, and related credit overlays have eased, although Federal regulators continue to monitor the situation.54
Nonetheless, access to credit for higherrisk but creditworthy consumers remains an ongoing concern given continued uncertainty over the impact of the expiration of foreclosure moratoriums and COVID19 forbearance plans on the mortgage market as well as lender capacity constraints due to strong refinance demand.

III. Legal Authority
Month-Advance-Obligation-Limit-for-Loans-inForbearance.aspx.
49 Press Release, Mortg. Bankers Assn, Share of Mortgage Loans in Forbearance Declines to 5.22%
Feb. 22, 2021, https www.mba.org/2021-pressreleases/february/share-of-mortgage-loans-inforbearance-declines-to-522-percent.
50 Warehouse providers are creditors that provide financing to mortgage originators and servicers to fund and service loans.
51 Maria Volkova, FHA/VA Lenders Raise Credit Score Requirements, Inside Mortg. Fin. Apr. 3, 2020, https www.insidemortgagefinance.com/
articles/217636-fhava-lenders-raise-fico-creditscore-requirements on file.

52 Press Release, Fed. Hous. Fin. Agency, Adverse Market Refinance Fee Implementation now December 1 Aug. 25, 2020, https www.fhfa.gov/
Media/PublicAffairs/Pages/Adverse-MarketRefinance-Fee-Implementation-Now-December1.aspx.
53 On April 10, 2020, Ginnie Mae released guidance on a Pass-Through Assistance Program whereby Ginnie Mae will provide financial assistance at a fixed interest rate to servicers facing a principal and interest shortfall as a last resort.
Ginnie Mae, All Participant Memorandum APM
2003: Availability of Pass-Through Assistance Program for Participants in Ginnie Maes SingleFamily MBS Program Apr. 10, 2020, https

www.ginniemae.gov/issuers/program_guidelines/
Pages/mbsguideapmslibdisppage.aspx?
ParamID=105. On April 7, 2020, Ginnie Mae also announced approval of a servicing advance financing facility, whereby mortgage servicing rights are securitized and sold to private investors.
Press Release, Ginnie Mae, Ginnie Mae approves private market servicerliquidity facility Apr. 7, 2020, https www.ginniemae.gov/newsroom/
Pages/PressReleaseDispPage.aspx?ParamID=194.
54 Fin. Stability Oversight Council, U.S. Dept of the Treasury, 2020 Annual Report, at 169, https
home.treasury.gov/system/files/261/FSOC2020
AnnualReport.pdf.

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The Bureau is proposing to amend Regulation Z pursuant to its authority under TILA and the Dodd-Frank Act.
Section 1061 of the Dodd-Frank Act transferred to the Bureau the consumer financial protection functions previously vested in certain other Federal agencies, including the Board.
The Dodd-Frank Act defines the term consumer financial protection function to include all authority to prescribe rules or issue orders or guidelines pursuant to any Federal consumer financial law, including performing appropriate functions to promulgate and review such rules,
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Federal Register / Vol. 86, No. 42 / Friday, March 5, 2021 / Proposed Rules