North Carolina Bankers Association - Carolina Banker Magazine, Fall 2021

Jeff D. Rogers Partner, Smith Debnam 919.250.2112 Caren D. Enloe Partner, Smith Debnam 919.250.2125 THE RULE IN GENERAL The Rule takes effect August 31, 2021. Because it is supplemental to the Mortgage Servicing Rules, its coverage is the same. That is, it only applies to mortgage loans secured by the bor- rower’s principal residence. Additionally, small servicers, as defined in the Mortgage Services Rules, generally are not covered. In a nutshell, the COVID-19 Rule modifies and adds temporary additional protections for all covered loans unless one of the following exceptions is met: (a) the foreclosure referral occurs (as permitted by applicable law) on or after January 1, 2022; (b) the borrower was more than 120 days delinquent prior to March 1, 2020; or (c) the action will become time- barred before January 1, 2022. Unless covered by one of these exceptions, banks and others in the mortgage industry will need to meet one of three procedural safeguards before referring 120-day delinquent accounts for foreclo- sure: (a) the borrower was evaluated based on a complete loss mitigation application and existing foreclosure protection conditions are met; (b) the property is abandoned; or (c) the borrower has been unresponsive to servicer outreach. CONSIDERATIONS BEFORE FORECLOSURE Have you updated your early intervention and loss mitigation policies and procedures for COVID-19 impacted residential mortgage loans? As foreclosures begin to ramp up again, there are two initial considerations for all lenders: (a) do they want to wait out the COVID-19 Rule and hold back foreclosure referrals until 2022; or (b) do they want to proceed forward with foreclosure referrals using the procedural safe- guards contained in the COVID-19 Rule. If the latter, the lender will need to ensure it has poli- cies and procedures in place to make necessary adjustments to comply with the COVID-19 Rule. IN THE TIME OF COVID FORECLOSURE For over a year, banks and others in the mortgage industry have had their efforts to foreclose on dis- tressed residential property placed on hold. As we slowly emerge from our pandemic cocoons and get back to the business of foreclosure, banks and other lenders will need to consider the new landscape, navigate the Consumer Financial Protection Bureau’s (CFPB’s) Mortgage Servicing COVID-19 Rule (the COVID-19 Rule) and adapt. 34 Carolina Banker | Fall 2021 FEATURE CONTENT