CFPB Reminds of Major Disaster Flexibility for Institutions and Consumers; Other Available Resources
In the wake of Hurricane Ida, which caused damage and flooding from Louisiana all the way to New York, the CFPB sent a message to its e-mail subscribers reminding them of its 2018 Supervisory Policy Statement Regarding Financial Institutions and Consumers Affected by a Major Disaster or Emergency and consumer resources webpage for disasters.
The 2018 Supervisory Policy Statement (SPS) provides information on existing flexibilities within laws and regulations, which can help credit unions to better assist their members who have been impacted. The SPS also states that “the Bureaus will also consider the impact of major disasters or emergencies on supervised entities themselves when conducting supervisory activities,” which can also help relieve some of the pressure on the financial institutions.
The specific regulatory guidance includes examples of flexibilities that can be found within Regulations B (ECOA), X (RESPA), and Z (TILA).
Regulation B allows a consumer to waive the requirement that a creditor must provide applicants for first-lien loans on a dwelling with copies of appraisals and other written valuations upon completion or three business days prior to consummation, or upon account opening. A waiver of this timing requirement allows potential expedited access to credit secured by a first-lien on a dwelling for members who were impacted by a disaster or emergency.
For loss mitigation, Regulation X, in general, requires a servicer to get a completed loss mitigation application prior to evaluating a borrower for option to retain the home, such as a loan modification, or to not retain the home, such as a short sale or deed-in-lieu of foreclosure. However, Regulation X includes the flexibility to offer short term options, based on a partial/incomplete loss mitigation application, and even allows servicers to proactively offer loss mitigation options to affected borrowers, without requiring an application, at all. These flexibilities allow servicers to offer quick relief to impacted borrowers without the burden of completing a full loss mitigation application and submitting all of the related documents, which may not be available to the borrower due to the major disaster or emergency.
Regulation Z also allows for the flexibility to waive or modify some timing requirements in order to meet a bona fide personal financial emergency. The SPS uses the 3-day right to rescind and the review periods prior to consummation as examples. Consumers have the ability to modify, or even waive, the right to rescind “if the consumer determines that the extension of credit is needed to meet a bona fide personal financial emergency.” Additionally, a consumer can modify or waive the review periods prior to consummation “if the consumer determines that the extension of credit is needed to meet a bona fide personal financial emergency.”
The commentary to section 1026.15(e) provides the procedure for waiving the right to rescind, and requires the consumer to “give a written statement that specifically waives or modifies the right, and also includes a brief description of the emergency.” The same language is included in section 1026.23(e) and its commentary, for waiving the right to rescind. Section 1026.19(a)(3) provides for a consumer’s waiver of the waiting period before consummation, and requires the consumer to “give the creditor a dated written statement that describes the emergency, specifically modifies or waives the waiting period, and bears the signature of all the consumers who are primarily liable on the legal obligation.”
Unfortunately, the term bona fide personal financial emergency is left undefined within the regulation. However, the commentary to section 1026.19(a)(3) states that whether the conditions for a bona fide personal financial emergency (BFPFE) are met is determined by the facts of each situation, and provides an example of a BFPFE: “the imminent sale of the consumer’s home at foreclosure, where the foreclosure sale will proceed unless loan proceeds are made available to the consumer.”
In addition to the CFBP’s Supervisory Policy Statement, there are also other resources available to credit unions. Credit unions can visit NCUA’s Hurricane and Disaster Information webpage, which lists helpful information and links for credit unions and consumers. NAFCU’s Disaster Relief Support Guide for Credit Unions is a helpful tool to have on hand, with a great deal of considerations and links to even more resources. Credit unions may also want to bookmark NAFCU’s Disaster Recovery Resources webpage which is a one-stop-shop for a great deal of links to resources that can be helpful in the aftermath of a major disaster or emergency.