CUNA supports the Consumer Financial Protection Bureau’s (CFPB) Regulation X amendments regarding streamlined modifications, but strongly objects to a proposed moratorium on foreclosures until 2022. The CFPB proposed a set of rule changes last month that would generally prohibit mortgage servicers from starting foreclosure until after Dec. 31, 2021.

“Regarding the proposed moratorium on foreclosures, the Bureau’s proposal is unnecessary, overbroad to the point of being unconstitutional, and adds additional complexity at a time when it is least needed,” the letter reads, adding that CUNA believes the moratorium exceeds the Bureau’s authority, restricts commercial speech and impedes access to the courts.

“When servicers contact consumers about the consequences of nonpayment, they are engaging in non-deceptive commercial speech, which is protected by the First Amendment,” the letter reads. “Additionally, servicers have a First Amendment right to petition the government, which includes access to the courts. Thus, an infringement of that right is constitutionally suspect.

“By restricting the exercise of servicers’ legal rights to engage in commercial speech and access the courts without providing a countervailing benefit, the Proposed Rule infringes on the constitutional rights of loan owners and investors and thus is vulnerable to a First Amendment challenge,” it adds.

CUNA also notes that the CFPB is likely overstating its estimate that that 800,000 loans will exit forbearance in September and October, as CUNA believes these loans will exit forbearance in a “much less concentrated time frame.”

CUNA also urges the CFPB to finalize other provisions of the proposed rule, including provisions that will allow credit unions to offer streamlined COVID-19 modifications that require less paperwork.

The proposal would:

• Establish a “special pre-foreclosure review” until December 31, 2021, during which time mortgage servicers will not be permitted to initiate foreclosure on any property considered the borrower’s principal residence.
• Temporarily permit mortgage servicers to offer certain streamlined loan modifications based on an incomplete application.
• Amends the requirements for early intervention and reasonable diligence obligations

“The proposed amendments will ensure that borrowers can quickly and easily transition to a paying status on their mortgage, protecting their homes, credit scores, and financial security,” CUNA’s letter reads. “This will also present the least amount of strain on credit union capacity and liquidity.”

CUNA also suggested a change in the early intervention requirements proposed by the CFPB, to remove a reference to “the last live contact” and replace with “a live contact no later than 30 days prior to the expiration of borrower’s current forbearance period.”