Last week the Bureau of Consumer Financial Protection (“BCFP” or “Bureau”) issued guidance on the operations of financial institutions and other supervised entities in the wake of major disasters and emergencies. The guidance explains that supervised entities have flexibility under the existing regulatory framework to take action that could benefit affected consumers.
This is not the first time the Bureau has issued guidance on this topic. Last year, the Bureau released a statement on Hurricanes Harvey and Irma and another on Hurricane Maria. Unlike the prior guidance, the statement released last week does not address a particular emergency or disaster but applies to emergencies in general.
The new guidance echoes prior guidance by providing examples in which regulations allow flexibility. For instance:
- Although RESPA’s Regulation X generally prohibits residential mortgage servicers from offering a loss mitigation option to borrowers based on an evaluation of an incomplete application, the guidance notes servicers may nonetheless offer short-term loss mitigation options. Because it could be difficult for consumers impacted by a disaster to obtain and submit the necessary documents to complete a timely application, this exception may allow servicers to better assist those borrowers.
- Although ECOA’s Regulation B generally requires creditors to provide first-lien loan applicants with copies of appraisals or other written valuations promptly upon completion, or three business days prior to consummation or account opening, whichever is earlier, the guidance notes that the applicant generally may waive that timing requirement and agree to receive the copy at or before consummation or account opening (except where otherwise prohibited by law). That exception may allow supervised entities to give consumers impacted by a disaster quicker access to credit.
Unlike prior guidance that expressly “encouraged” supervised entities to take these steps, this latest guidance only states that supervised entities are permitted to use the flexibility. In addition, prior guidance encouraged supervised entities to take other actions to help consumers after a disaster, such as limiting or waiving fees, including late fees; easing documentation or credit-extension requirements; increasing ATM daily cash withdrawal limits; and increasing capacity for customer service hotlines, among other things. The guidance released last week omits those recommendations. Perhaps the lack of recommendations or encouragement is in line with the Bureau’s recent reminder that agency guidance documents are nonbinding.
The guidance also acknowledges that the supervised entities themselves may face difficulties due to a major disaster and notes that “the Bureau will consider the circumstances that supervised entities may face…and will be sensitive to good-faith efforts to assist consumers” when conducting examinations or other supervisory activities.
Many other agencies have issued policies on handling disasters. For example, last week the Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the National Credit Union Administration, and the Conference of State Bank Supervisors released a joint statement addressing Hurricane Florence. Among other things, the agencies encouraged financial institutions to meet the needs of affected communities and stated that “[t]he agencies recognize that efforts to work with borrowers in communities under stress can be consistent with safe-and-sound practices as well as in the public interest.” Also last week, the Federal Housing Administration (“FHA”) issued a reminder of its guidance for the origination and servicing loans in Presidentially-Declared Major Disaster Areas. In addition to other protections, FHA-insured mortgages secured by properties in Presidentially-Declared Major Disaster Areas are subject to a 90-day foreclosure moratorium. FHA may extend such a moratorium, and in fact, the moratorium related to certain homeowners in Puerto Rico and the U.S. Virgin Islands ended just last week. Fannie Mae and Freddie Mac also have requirements for handling disasters.