By Chris Prentice
WASHINGTON (Reuters) – U.S. bank supervisors will not penalize mortgage companies if they miss regulatory deadlines for communicating with borrowers while fielding an unprecedented surge in queries due to disruptions caused by the novel coronavirus, an official at a banking regulator said.
The banking agencies plan to issue guidance soon that will effectively waive rules requiring mortgage lenders and servicers respond to borrowers within a specific time frame on matters such as delinquencies and balance errors, the source said.
“There would be no…action if a bank doesn’t technically comply with mandated timelines so long as there’s a good faith effort and it’s in the interest of addressing core coronavirus concerns,” the official said.
Lenders have been inundated with calls and queries from borrowers unable to make payments after losing jobs due to widespread business shutdowns aimed at slowing the spread of the virus. Bank operations are also struggling with much of their staff working from home.
That has made it harder for mortgage companies to comply with laws that guard against abusive lending practices, including the Truth in Lending Act and the Real Estate Settlement Procedures Act, which set stringent turnaround times for responding to borrowers on a range of issues.
The relief would be temporary and should address worries on the part of banks that they would face strict penalties or other enforcement action if they failed to meet the regulatory deadlines, the source said. This will allow banks to focus on critical queries on repayment relief and other forbearance issues.
A spokesperson for the Office of the Comptroller of the Currency declined to comment. The Consumer Financial Protection Bureau, Federal Deposit Insurance Corporation and Federal Reserve Board did not respond immediately to requests for comment.
Big banks like JP Morgan Chase & Co and Wells Fargo & Co have all promised assistance to borrowers in recent weeks, though U.S. borrowers seeking reprieve from big banks have said they were not getting the help they expected.
Many banks on Friday also had to reallocate staff to assist a flood of small business customers racing to secure a $350 billion pot of government rescue loans.
Banking regulators around the world have been offering breaks and easing restrictions on banks to prevent liquidity issues as the coronavirus pandemic grips the global economy. They have given breaks on banks’ capital requirements, relief on new accounting requirements and have urged banks to get back into small-dollar lending.
(Reporting by Chris Prentice; Editing by Michelle Price and David Gregorio)
