By Nicole D. Prysby, J.D.
The CFPB issued a no-action letter template that would enable mortgage servicers to use an online platform to implement loss-mitigation efforts for their borrowers and another that would facilitate small-dollar lending.
On May 22, 2020, the Consumer Financial Protection Bureau announced that it issued two no-action letter (NAL) templates, pursuant to its 2019 policy that permits entities such as service providers and trade associations to secure a template to serve as the foundation for NAL applications from companies that provide consumer financial products and services. One NAL template will enable mortgage servicers to use an online platform provided by Brace Software, Inc. to implement loss-mitigation efforts for their borrowers. The second NAL template was issued in response to an application from the Bank Policy Institute (BPI) for a standardized small dollar credit product that may be offered by an insured deposit-taking institution to customers who hold deposit accounts at the institution.
The first NAL template, requested by Brace, would enable mortgage servicers to use Brace’s online platform to implement loss-mitigation efforts for their borrowers. Brace’s application explains that it offers an online platform that provides a digital loss mitigation solution to mortgage servicers, and that the platform is offered to mortgage servicers on a "software-as-a-service" basis. The platform enables consumers to self-service their loss mitigation requests, securely communicate with the servicer, and securely submit documents in support of loss mitigation applications; automates the Real Estate Settlement Procedures Act timeline process for servicers; and streamlines the loss mitigation decisioning process. The platform has two components: (i) the consumer user interface, which consists of a dynamic workflow with directed document upload, and (ii) the servicer workflow. The consumer user interface is a dynamic version of the Fannie Mae/Freddie Mac Form 710/Borrower Solicitation Package, the paper loss mitigation application commonly used by mortgage servicers. The Bureau granted Brace’s application, subject to certifications that the applicant intends to use the Platform for processing loss mitigation applications, will consider a loss mitigation application to be received when a user electronically submits it, and will process cease communications requests received on the Platform.
The second NAL template application was from the Bank Policy Institute (BPI). BPI described its product as a standardized small dollar credit product that may be offered by an insured deposit-taking institution to customers who hold deposit accounts at the institution. The proposed product could be structured as an installment loan or as a line of credit, and would not exceed $2,500. No collateral would be required and the proposed product would not permit rollover of the loans. BPI explained that an NAL template from the CFPB would incentivize depository institutions to re-enter the small-dollar credit products space, which would lead to a number of consumer benefits, including (i) addressing consumers’ significant needs for short-term credit; (ii) expanding access to credit; (iii) serving the financial needs of underbanked populations; (iv) increasing the regulation of small-dollar loans and access to depository institution services; (v) facilitating clear, simple, and transparent terms and disclosures to consumers; (vi) offering a streamlined application and underwriting process for small-dollar products; and (vii) meeting consumer demands for online and mobile banking options. In its approval letter, the CFPB noted certain required Guardrail Certifications, such as applicant status as an institution of a certain size, that only consumers who hold deposit accounts with the institution be offered the product, and other details about structure and servicing of the product.
Companies: Bank Policy Institute; Brace Software, Inc.; Fannie Mae; Freddie Mac
MainStory: TopStory CFPB ConsumerCredit GovernmentSponsoredEnterprises Loans Mortgages RESPA
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