New Guidance Aims to Help Institutions and Consumers Navigate Mortgage Process Efficiently

By Bruce Rumbold, CCBCO on May 1, 2020
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Bruce Rumbold, CCBCO

Manager | Risk Advisory Services


April 29, 2020

The CFPB has issued some new guidance surrounding mortgage originations. This guidance is designed to help both financial institutions and consumers get through the mortgage process more expediently.

The Bureau is issuing an interpretive rule clarifying that consumers can exercise their rights to modify or waive certain required waiting periods under the TILA-RESPA Integrated Disclosure Rule and Regulation Z rescission rules.

Under the revised TRID and the Regulation Z Rescission Rules, after receiving the required disclosure(s), a consumer may modify or waive these waiting periods if the consumer determines that he or she needs credit extended to meet a bona fide personal financial emergency. For the waiting periods to be modified or waived, the creditor must have a dated written statement by the consumer that: (1) describes the emergency, (2) specifically modifies or waives the waiting period, and (3) bears the signature of all consumers who are primarily liable on the legal obligation (for the TRID Rule) or who are entitled to rescind (for the Regulation Z Rescission Rules).

See the full text here: Read the interpretive rule addressing the TRID Rule and Regulation Z rescission rules issues

The Bureau is also issuing an FAQ document that addresses relief under current ECOA requirements and when creditors must provide appraisals or other written valuations to mortgage applicants in order to expedite access to credit for consumers affected by the COVID-19 pandemic.

Read the FAQ document addressing the ECOA Valuations Rule issues 

April 6, 2020

The New York Times reports that The Federal Reserve announced that it will use its emergency lending powers to backstop loans to small businesses so that lenders can move the loans off balance sheets and continue lending to other customers.

The Fed said it would release more details later this week on how this new liquidity program would work.

Modifications to the Community Bank Leverage Ratio Framework

This is an optional calculation for banks with assets of less than $10 billion designed to reduce burden by removing the requirements for calculating and reporting risk-based capital ratios.  The reduction from 9% to 8% is designed to promote more lending. Note that capital may fall below the 8% threshold for a period of 2 quarters.

I hope that financial institutions are, first and foremost, bolstering their reserves for bad debt effective for the end of the first quarter to reflect the likelihood of greater portfolio losses in the future across the board.

The Federal Reserve’s commitment stated above will also help in maintaining capital levels.

Final Interim Rule

  • One interim final rule implemented section 4012 of the Coronavirus Aid, Relief, and Economic Security Act (statutory interim final rule). The statutory interim final rule provides that, as of the second quarter 2020, a banking organization with a leverage ratio of 8 percent or greater (and that meets the other existing qualifying criteria) may elect to use the community bank leverage ratio framework.
  • The statutory interim final rule also establishes a two-quarter grace period for a qualifying community banking organization whose leverage ratio falls below the 8-percent community bank leverage ratio requirement, so long as the banking organization maintains a leverage ratio of 7 percent or greater.
  • The second interim final rule provides a transition from the temporary 8-percent community bank leverage ratio requirement, under the statutory interim final rule, to a 9-percent community bank leverage ratio requirement (transition interim final rule).
  • When the requirements in the transition interim final rule become applicable, the community bank leverage ratio requirement will be greater than 8 percent for the second through fourth quarters of calendar year 2020, greater than 8.5 percent for calendar year 2021, and greater than 9 percent thereafter. The transition interim final rule also maintains a two-quarter grace period for a qualifying community banking organization whose leverage ratio falls no more than 100 basis points below the applicable community bank leverage ratio requirement.

Regulatory Capital Rule: Temporary Changes to the Community Bank Leverage Ratio Framework

Regulatory Capital Rule: Transition for the Community Bank Leverage Ratio Framework

April 3, 2020

Several updates today including from DFS, Joint Federal Agency Statements and FAQs provided by the CFPB.

Regulatory Relief – Forbearance, Early Intervention and Escrow Statements

The following guidance by the regulators should provide some operational burden in providing relief but it is not a complete pass on the regulatory requirements. Customers asking for forbearance during the COVID-19 crisis by only affirming injury during the pandemic are actually making incomplete loss mitigation applications.

The Bureau indicates that it does not intend to take any supervisory or enforcement action for servicers:

  • failing to provide the acknowledgement for incomplete loss mitigation applications. The servicer sends the acknowledgment notice before the end of the forbearance period, for a short-term payment forbearance program (or the end of the repayment period, for a short-term repayment plan). Given the nature of the CARES Act forbearance program, all requests will be determined to be a loss mitigation application. This applies to the 30-day evaluation and appeals notices;
  • for delays in establishing or making good faith efforts to establish live contact with delinquent borrowers given that the bank is making a good faith effort; and
  • for delays in sending the early intervention notices given that the bank is making a good faith effort.

The Bureau indicates that it does not intend to take any supervisory or enforcement action for servicers for delays in sending annual escrow statements provided these statements are provided in a reasonable time. This applies regardless of whether a borrower is experiencing a financial hardship due, directly or indirectly, to the COVID-19 emergency.

Links are below, including a link to a recently published FAQ by the CFPB.

DFS News – Payroll Protection Program and Help for CDFIs

The NYS Department of Financial Services previously indicated that they expected customers to provide evidence of injury resulting from COVID-19. They have now back-tracked and are in line with what Federal regulations require.

The interim final rule (Industry Letter) provides that a lending institution does not need to conduct any verification for a Payroll Protection Program loan if the borrower submits documentation supporting its request for a loan and attests that it has accurately verified the payments for eligible costs.

Here is encouragement from DFS that has the potential to provide positive press, and these activities will go a long way toward helping a bank maintain or achieve a Satisfactory or Outstanding CRA rating.  CDFIs are Community Development Financial Institutions that are generally not-for-profit and lend money to customers in low to moderate census tracts.

The interim final rule (Industry Letter) indicates the Department strongly encourages all its regulated institutions to provide funding and grants to CDFIs and other mission-driven lenders so they can increase and enhance their lending capacity and help small businesses that are in urgent need of capital and funding. Without such funding and grants, many of these businesses will not survive, which will adversely impact New York’s economy.

Assistance and Guidance from Freed Maxick

New call-to-actionThe Freed Maxick Covid-19 Resource Center has a wealth of information and guidance on a wide range of topics related to tax relief and benefits, regulatory relief and benefits, and business continuity in the era of Covid-19.

Click on the button to explore insights, observations and updates.

If you wish additional guidance, we are available to discuss your issues and concerns. Connect with us by email at or call Freed Maxick at 716.847.2651.

Please keep in mind that due to the quickly-changing nature of the COVID-19 pandemic, you should always discuss changes with your Freed Maxick advisor or legal counsel. 

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