Flurry of servicing proposals spurs call for more time on Reg X changes

The Consumer Financial Protection Bureau's proposed modernization of servicing rules is welcome, but a coalition of housing finance groups, grappling with several other election-year policy changes, want more time for review.

The revamp of the Regulation X rules is something both consumer and industry interests have sought for years due to a need to align pandemic-related updates to servicing policy at other agencies that hold sway over the mortgage market.

However, those other regulators also are in the midst of their own comment periods for proposals. Plus, mortgage companies are simultaneously juggling implementations with short deadlines. That complicates the matter of commenting on the CFPB plan by Sept. 9, the coalition said.

"Given the extensive set of policy changes that servicing stakeholders are now confronting, stakeholders need more time than has been allotted," eight industry groups said in a letter to CFPB Director Rohit Chopra.

The coalition's members also said other "potentially complex issues, like the procedural review period" in the CFPB proposal itself need additional time for examination.

The American Bankers Association, Community Home Lenders of America, Housing Policy Council, Independent Community Bankers of America, the Mortgage Bankers Association, National Mortgage Servicing Association, Structured Finance Association and U.S. Mortgage Insurers signed the missive.

The CFPB's proposal aims to transition Reg X from a servicing regime that involves more documentation to one that currently has less of that type of red tape.

It also, in most cases, requires servicers to make a review of a distressed loan in which other options must be explored before proceeding to foreclosure and limits the fees that can be charged borrowers during that period.

At the same time, servicers face at least five deadlines for comments or implementation of new initiatives between now and Jan. 1. These include the CFPB measure and others from the Department of Veterans Affairs, Federal Housing Administration, and the government-sponsored enterprises.

The implementation deadlines the letter specifically mentions are the ones for the VA's Servicing Purchase program, which is the successor to discontinued pandemic relief innovation, and the administration's payment supplement program, which addresses challenges posed by rate fluctuations.

The deadlines for these programs respectively are Oct. 1 and Jan. 1. Some industry groups also have sought more time to implement VASP.

The other significant comment periods mentioned are for the FHA's redrafted servicer defect taxonomy, and changes to Flex Modification programs at the enterprises, Fannie Mae and Freddie Mac.

More work beyond that also is afoot, the letter noted. In addition to FHA and the Department of Veterans Affairs, two other specialized agencies that also back loans included in Ginnie Mae securitizations, U.S. Department of Agriculture Rural Development and Public and Indian Housing insurance, also have servicing changes in the works.

"The same group of subject matter experts that need to consider and provide input on your proposal are actively engaged on these other workstreams," the groups said in their letter.

The coalition has asked for at least another 30 days to review the CFPB's proposal in light of this workload.