CFPB Assisting Loss-Mitigation Efforts

The Consumer Financial Protection Bureau (Bureau) has announced that it issued two No-Action Letter (NAL) Templates under its innovation policies.

"Regulatory uncertainty can hinder the development of innovative products and services with the potential to benefit consumers," the Bureau said in a satement. "To encourage innovation, last year the Bureau introduced an improved NAL Policy that includes, among other things, a more streamlined review process focusing on the consumer benefits and risks of the applicant’s product or service."

NALs provide increased regulatory certainty through a statement that the Bureau will not bring a supervisory or enforcement action against a company for providing a product or service under certain facts and circumstances. The improved Policy also includes an innovative provision concerning NAL templates, which permits entities such as service providers and trade associations to secure a template that can serve as the foundation for NAL applications from companies that provide consumer financial products and services.

Mortgage servicers seeking to assist struggling borrowers to avoid foreclosure and engage in loss mitigation efforts would be able to apply for their own NAL. The template, requested by Brace Software, Inc. (Brace), would enable mortgage servicers to use Brace’s online platform to implement loss-mitigation efforts for their borrowers.

The platform is an online version of the Fannie Mae Form 710, which is the loss mitigation application used by most mortgage servicers.  While the Bureau does not endorse particular products or providers, digitizing the loss mitigation application process has the potential to improve a process that is experiencing an increase in loss mitigation requests from consumers due to the COVID-19 pandemic.

To further competition in the small-dollar lending space and facilitate robust competition that fosters access to credit, the Bureau also approved a NAL template that insured depository institutions can use to apply for a NAL covering their small-dollar credit products.  The NAL template includes important protections for consumers who seek  small-dollar loan products.