The Consumer Financial Protection Bureau (CFPB) recently released new consumer protection and loss mitigation-related principles in an effort to guide mortgage servicers, investors, government housing agencies, and policymakers as the U.S. economy transitions into a post-housing crisis environment. The Bureau expresses optimism that defaults will continue to decrease as a result of underwriting based on the ability to repay rule, though the need for a full complement of mortgage assistance tools will remain. The new principles—Accessibility, Affordability, Sustainability and Transparency—were first articulated at a November 2015 “Life After HAMP” meeting hosted by the Treasury and are intended to aid in the transition from the soon-to-expire HAMP into new programs. The CFPB’s stated goal is to help consumers avoid foreclosures, recognizing that “avoiding foreclosure is often in the best interests of both the investor and consumer.”
The CFPB indicates that the principles do not establish new legal requirements, but are instead intended to foster discussion among the industry, consumer groups and policymakers. And while the CFPB notes there is broad agreement within the industry on these high-level principles, it acknowledges that it is less clear how they will translate into specific programs. The CFPB cites a fifth principle, accountability, as critical to the implementation of the other principles, but it abstains from a detailed discussion of accountability in this particular release.
For specifics within the four key principles, the CFPB enumerates a number of sub-principles, most of which are anticipated components of their respective, and self-descriptive, principles. For example, a particular component of Affordability is “[w]hen repayment plans and modifications are offered, they are generally designed to produce a payment and loan structure that is affordable for consumers.” Other components seem familiar, such as the Accessibility component that “[c]onsumers’ requests for loss mitigation assistance are responded to timely and effectively by servicers,” though it is unclear whether such a component may be a harbinger of new or amended regulations. Another example is the Sustainability component that “[l]oss mitigation outcomes are monitored by servicers and investors to determine their impact on re-default rates, and program terms are adjusted to achieve effective outcomes and respond to economic conditions.” Does this mean servicers and investors can expect onerous new monitoring requirements following the expiration of HAMP in January 2017? One can only guess at this juncture.
In the short term, however, it would certainly be prudent for servicers to evaluate their policies, procedures, and processes to ensure they align with the new principles outlined by the CFPB.