220.127.116.11 Minimum Rules Applicable to All Homeowners in Disaster Areas
The rules implemented by the Consumer Financial Protection Bureau (CFPB) are applicable to all mortgages. Regulation X (implementing the Real Estate Settlement Procedures Act) provides the most relevant regulations.
Regulation X does allow a servicer to offer loss mitigation (also known as “workout”) options to a borrower who has not submitted an application. A servicer also may offer loss mitigation options to a borrower when the offer is not based on any evaluation of information submitted by the borrower in connection with a loss mitigation application.111
The CFPB has said that “[t]his regulatory flexibility permits servicers to offer relief to borrowers affected by a major disaster or emergency without first having to collect a complete application. These borrowers in particular may have difficulty timely obtaining and submitting application documents and information.”112
In contrast, the general rule is that servicers obtain a complete loss mitigation application before evaluating a mortgage borrower for a loss mitigation option, such as a loan modification or short sale. Servicers generally may not offer a loss mitigation option based upon an evaluation of any information provided in connection with an incomplete application.113 However, Regulation X permits servicers to offer certain short-term options based upon an evaluation of an incomplete application.114
111 See Reg. X, 12 C.F.R. § 1024.41, cmt. 41(c)(2)(i)-1.
112 See Consumer Fin. Prot. Bureau, Statement on Supervisory Practices Regarding Financial Institutions and Consumers Affected by Hurricanes Harvey and Irma (Sept. 8, 2017), available at www.consumerfinance.gov.
113 Reg. X, 12 C.F.R. § 1024.41(c)(2)(i).
114 Reg. X, 12 C.F.R. § 1024.41(c)(2)(iii).