Joint Letter to CFPB on the Request for Information Regarding Mortgage Refinances and Forbearances

Comment Intake Mortgage Refinances and Forbearances RFI
Consumer Financial Protection Bureau
1700 G Street NW
Washington, DC 20552

To Whom it May Concern:

The American Bankers Association (ABA) and Consumer Banker Association (CBA), hereafter "the Associations," appreciate the opportunity to offer comments to the Consumer Financial Protection Bureau (Bureau) pursuant to its request for information (RFI) regarding: (1) ways to facilitate mortgage refinances for consumers who would benefit from refinancing, especially consumers with smaller loan balances; and (2) ways to reduce risks for consumers who experience disruptions in their financial situation that could interfere with their ability to remain current on their mortgage payments.

The Associations support the Bureau's "overall goal of ensuring that consumers have access to financial opportunities presented by the housing finance system" and encourages the Bureau's exploration of additional information on refinances and loss mitigation offerings. The Associations offers the following comments to guide any agency action or rulemaking in relation to mortgage origination and servicing:

• The concept of "auto refi" loans and "one-way" ARMs, as defined in this RFI, may have conceptual consumer benefits, but these products will introduce investor risks and other difficulties that will ultimately lead to higher prices and would not improve access to credit for borrowers. Given this reality, there is currently no secondary market for these types of loans, and designing them will be highly complex and challenging. Likewise, portfolio lenders are not likely to develop product offerings for these types of loans, for reasons we describe.
• The government took several actions during the COVID-19 pandemic to support distressed borrowers, including passing the CARES Act, amending the mortgage servicing rules, publishing agency guidance, and developing the Homeowner's Assistance Fund. ABA offers feedback on what worked and did not work during the COVID-19 pandemic in relation to these actions.
• Like "auto refi" loans and "one-way" ARMs, the concept of automatic forbearance may have some consumer benefit, but ultimately, such programs may impact the ability of borrowers to pursue their preferred loss mitigation offer and could lead to liquidity issues for financial institutions. Instead of mandating such programs, the Bureau should focus on providing financial institutions with greater flexibility to offer streamlined modification products and to conduct consumer outreach and education.
• One of the lessons learned from the pandemic is that simplicity is key, as shown by the success of the COVID-19 forbearance programs. When legislation and rulemaking is straightforward and simple, borrowers can better understand their rights and available options, and the industry can develop and implement processes more efficiently and accurately. ABA offers multiple recommendations to modify the mortgage servicing rules in order to promote consumer protection and improve the efficiency and effectiveness of mortgage servicing, which will benefit both borrowers and financial institutions.

Download the comment letter to read the full text.