How Forbearance Impacts Mortgage Loans

What Does Forbearance Mean for the Mortgage Industry

As we’ve all seen recently, regulators and the GSEs are focused on creating policies and guidance to help borrowers impacted by COVID-19 while maintaining liquidity.  Unfortunately, a growing volume of consumers continue to be impacted.

While the CDIA provided guidance on data reporting, the credit system relies on the data furnishers to report accurately. Please share the information below to educate your teams on where to look for forbearance on the credit report, to help with the reporting standards required for the GSEs, and to form your own customer service approach to addressing forbearance.

CDIA Notice to Lenders

The Consumer Data Industry Association (CDIA) sent this notice to remind lenders and creditors how they can work with their borrowers to address financial problems that those borrowers may be experiencing as a result.  Please note the specific guidance available for lenders who report information about (1) consumers’ accounts affected by natural and declared disasters (FAQ 58), or (2) consumers’ accounts placed in forbearance as a result of a natural or declared disaster, or for other reasons (FAQ 45).

CFPB Communications

The Consumer Financial Protection Bureau (CFPB) has sent out several communications to help lenders address how to support consumers impacted by COVID-19 as well.

• CFPB notice regarding credit reporting and the CARES ACT.
  • Reinforces their position on handling payment obligations below and the extension to 45 days to for lenders to handle disputes.
• CFPB Statement on handling payment obligations—note that delinquencies do not need to be reported as “past due” when loans are in a new deferred status as agreed upon with the consumer.
  • Past Due Reporting: “With regard to loans not otherwise reportable as past due, financial institutions are not expected to designate loans with deferrals granted due to COVID-19 as past due because of the deferral. A loan’s payment date is governed by the due date stipulated in the legal loan documents. If a financial institution agrees to a payment deferral, this may result in no contractual payments being past due, and these loans are not considered past due during the period of the deferral.”

Reading the Credit Report

Credit reports are unchanged since reporting guidelines were in place already to support forbearance and natural disaster.  However, we are starting to see an increase credit reports that contain information needed to identify accounts impacted by COVID-19 or any other natural disaster.  At the tradeline level, the narrative descriptions will display outlining consumers impacted. 

Here are some examples, as well as a list of the narratives that may be more frequently reported moving forward: