Washington, DC – U.S. Senator Sherrod Brown (D-OH), Ranking Member of the Banking Committee, along with Elizabeth Warren (D-MA), Senators Chris Van Hollen (D-MD), Robert Menendez (D-NJ), and Jack Reed (D-RI), also members of the Banking Committee, sent a letter to Consumer Financial Protection Bureau (CFPB) Director Kathy Kraninger regarding the agency’s failure to use its authority to ensure that borrowers are aware of the mortgage relief options they are legally entitled to during the COVID-19 pandemic.
“Your agency has the duty and the authority to take actions that ensure families can stay in their homes and prevent a series of irreversible foreclosures. But you are failing to meet your responsibilities,” the senators wrote. “Instead of taking proactive steps to make sure that borrowers are aware of their options for mortgage assistance when they need it, the Bureau has been coddling the largest banks and mortgage servicers while doing virtually nothing to help borrowers.”
The Coronavirus Aid, Relief, and Economic Security (CARES) Act provided borrowers with federally-backed mortgages the right to request a forbearance for up to one year by submitting a request to their mortgage servicer and affirming that they were experiencing “financial hardship during the COVID-19 emergency.” However, Fannie Mae’s National Housing Survey, released last month, found that 56 percent of borrowers surveyed that made less than $50,000 were not familiar with the mortgage relief options. Likewise, the survey showed that a statistically significant higher amount of Black and Hispanic borrowers were unaware of their mortgage relief options compared to their white counterparts.
“These data, and the stark disparities they reveal, indicate that efforts to date by servicers, and by the government agencies responsible for protecting consumers – most notably, the CFPB – have failed to ensure that homeowners are aware of relief options,” wrote the senators.
The senators’ letter provides “several steps the Bureau can and must immediately take to use its existing authority to help borrowers.”
1. Aggressively enforce existing regulatory requirements for servicers to notify borrowers of options to avoid foreclosure after they are in default for a certain period. As the letter notes, shortly after the CARES Act passed CFPB joined banking regulators in issuing a statement to essentially inform mortgage servicers that the Bureau would not enforce certain violations of the law.
2. To ensure that its enforcement efforts are clear and consistent, the Bureau should issue additional guidance to servicers, including a model notice, to specify procedures for notifying borrowers of their available options before a borrower ends up in delinquency. Prior inquiries by the senators, as well as reviews by two government watchdogs, found that mortgage servicers shared little, incomplete, or even inaccurate information with customers about their relief options.
3. The CFPB should mount a strong public awareness campaign to ensure that borrowers are aware of available forbearance relief. This awareness campaign should be targeted to minority borrowers and borrowers with limited English proficiency, and borrowers with household incomes of less than $50,000, who are being hit hardest by the pandemic, the economic collapse, and the failure of CFPB to enforce the law.
“As the pandemic-induced economic collapse enters its sixth month, homeowners who lost their jobs and are relying on unemployment benefits to make ends meet just had their weekly benefits cut in half. Senate Republicans and the Trump Administration are refusing to pass another urgently needed federal relief bill. Given this inaction, it is essential that the Bureau use every single tool at its disposal to ensure these individuals are aware of and understand their options to keep their homes during this unprecedented global pandemic,” the senators wrote.
The letter also requests that CFPB respond to questions about its ongoing efforts and share its plans to fix the problem.
A full copy of the letter can be found here.