GSE Deferral Programs Continue To Pose Risk For Mortgage Servicers

In mid May 2020, we highlighted that the Fannie Mae and Freddie Mac (GSEs) COVID-19 payment deferral programs put mortgage servicers at risk of violating some of the Consumer Financial Protection Bureau's (CFPB) Mortgage Servicing Rules in Regulation X. When originally introduced, the GSEs' COVID-19 payment deferral programs seemed to require servicers to offer a loss mitigation solution based upon an incomplete loss mitigation application in violation of the CFPB's anti-evasion clause. On June 23, 2020, after pressure from the industry, the CFPB released an interim final rule amending Regulation X in a manner that removed many of the barriers that prevented mortgage servicers from being able to offer the GSEs' COVID-19 payment deferral in compliance with applicable law. Unfortunately, the interim final rule simply isn't broad enough to save mortgage servicers from legal risks associated with the GSEs' non-COVID-19-related payment deferral programs.