A new report from the Federal Housing Finance Agency (FHFA) Office of the Inspector General (OIG) found that mortgage servicers might be failing to provide statutorily required information to borrowers about forbearance plans.
In response to the report, FHFA told the OIG that it shared its concern that servicers might not be adequately informing homeowners that forbearance is available to them.
OIG said it began the review to examine the oversight provided by Fannie Mae and Freddie Mac (also known as the GSEs or Enterprises) over its servicers’ compliance with the CARES Act rules on forbearance plans. What it learned was that Fannie and Freddie – and FHFA – do not believe it is their responsibility to test whether servicers are in compliance with the statute.
“According to the Enterprises, their long-standing business relationships with mortgage servicers, the servicers’ familiarity with the Enterprises’ servicing requirements, and their continual contact with servicers give them confidence that servicers are well-informed of their legal and contractual obligations under the CARES Act and implementing guidance,” the OIG report stated. “The Enterprises rely on representations and warranties made by each servicer that it complies with applicable law and regulations. A breach of these representations and warranties can lead an Enterprise to invoke contractual remedies. In addition, each Enterprise reported to us that it obtains an annual certification from each servicer that it complies with applicable law and regulations. FHFA advised us that it considered this oversight acceptable.”
OIG reviewed a sample of 20 large, 20 medium and 20 small servicers’ websites to determine compliance.
“We found incomplete and/or unclear information about forbearance and repayment on 14 of the 20 websites of the large servicers and generally limited to no information on forbearance and repayment on the remaining 40 websites,” the report stated.
In a few cases, OIG stated, information on some servicers’ websites appeared to contradict the CARES Act requirements or FHFA and Enterprise guidance.
“For example, two of the small servicer websites instruct homeowners that they must provide proof of unemployment and other documentation to obtain mortgage forbearance; another servicer website maintains that all missed payments must be repaid in a lump sum at the end of the forbearance period,” the report stated.
Congress granted homeowners with Fannie Mae and Freddie Mac mortgages a legal right to forbearance upon an attestation of financial hardship from COVID-19, and FHFA has announced that lump sum repayment is not required once forbearance ends.
The OIG report said Fannie and Freddie could not determine whether that was happening because it did not have the data to examine.
“We observe, from the information provided to us by the Enterprises, that neither Enterprise has collected data sufficient to permit an assessment of whether servicers are complying with the CARES Act and implementing guidance,” the report stated. “The Enterprises reported to us that they have not asked any servicer to demonstrate compliance with the CARES Act and implementing guidance. Based on our survey of 60 websites hosted by servicers, we could not determine whether homeowners were provided with accurate and complete information about forbearance.”