Sept 27 -- The Consumer Financial Protection Bureau (Bureau or CFPB) is seeking comment from the public about (1) ways to facilitate mortgage refinances for consumers who would benefit from refinancing, especially consumers with smaller loan balances; and (2) ways to reduce risks for consumers who experience disruptions in their financial situation that could interfere with their ability to remain current on their mortgage payments. Comments must be received by November 28, 2022.
America's housing finance system provides important opportunities for consumers to access credit for housing and strengthen their financial standing. When broader macroeconomic forces result in declining interest rates, transparent and competitive markets should allow borrowers to benefit from lower rates, including through refinancing opportunities.
These lower interest rates may allow borrowers to improve their financial condition by reducing their monthly payments, allowing borrowers to save more or pay down their mortgages more rapidly, making it easier for them to build wealth and equity. In addition, when that equity is threatened by temporary disruptions in the economy or in consumers' lives, products and policies that offer repayment flexibility may help mitigate those risks. In this Request for Information (RFI), the Bureau is seeking information about ways to help ensure that consumers have access to these opportunities. In particular, the Bureau is requesting information about (1) ways to facilitate residential mortgage loan refinances for borrowers who would benefit from refinances, especially borrowers with smaller loan balances; and (2) ways to reduce risks for borrowers who experience disruptions that could interfere with their ability to remain current on their mortgage payments. . . .
The CFPB welcomes comments from consumers, creditors, and other stakeholders, including the submission of descriptive information about experiences of people participating in the mortgage market, as well as research and other evidence. Commenters need not answer all or any of the specific questions posed. These questions are not meant to be exhaustive; the Bureau welcomes additional relevant comments on these important topics.
Barriers to Refinancing
1. What barriers may prevent consumers from accessing falling interest rates through refinancing and what solutions could lower those barriers, particularly for consumers with smaller loan balances? Are there particular issues in obtaining refinances or would any particular approaches be more effective for certain types of homeowners, such as servicemembers, older adults, and first-time homeowners?
2. To what extent do large fixed costs of refinancing and limited profitability for smaller loan balances limit beneficial refinances? What potential policies could lower costs for beneficial refinances?
3. How much do common risk-based underwriting factors like credit scores and loan-to-value ratios account for the differences in refinancing rates across the population?
4. To what extent do the types of creditors offering refinance products in particular geographic areas affect refinancing rates in some areas and for some consumers?
5. To what extent are refinancing rates affected by potential barriers that may be more difficult to quantify, including borrowers' shopping behavior, trust of financial institutions, or the complexity and documentation involved in the refinancing process?
6. To what extent do consumers in rural areas face limited opportunities for refinances and what are the factors, including smaller loan balances, that may limit refinance opportunities for those consumers?
Targeted and Streamlined Refinances
1. How can the Bureau support industry efforts to facilitate beneficial refinances through targeted and streamlined refinance programs?
2. What are the current barriers to widespread use or promotion of existing refinance programs and, relatedly, what features of refinance programs are important to promoting widespread use?
3. What protections should be included in refinance programs to ensure consumer benefit, such as requirements for a lower interest rate and monthly payments, loan term limits, limits on serial refinancing, and requirements to refinance the consumer into a more stable mortgage product?
4. Should the Bureau's rules, including the ATR-QM rule, be amended to encourage beneficial refinances while preserving important protections for consumers? If so, how? What are the risks and benefits of doing so?
5. What are the risks and benefits of removing or modifying the current ATR-QM requirement that a creditor must consider and verify a consumer's income or assets relied on in making the loan in the context of a refinance program?
Potential New Products To Facilitate Refinances
1. What products or programs have lenders introduced to attempt to facilitate refinances for borrowers who would benefit from refinancing? What are the advantages and disadvantages of these products and programs?
2. What are the potential benefits and drawbacks of auto-refi mortgages and one-way ARMs?
3. Could creditors feasibly market and price auto-refi mortgages and one-way ARMs?
4. How could creditors most effectively structure auto-refi mortgages?
5. How could creditors most effectively structure one-way ARMs?
6. How could these products be designed to minimize risks to consumers?
7. Under what market conditions should an auto-refi mortgage automatically refinance?
8. Under what market conditions should the rate of a one-way ARM change?
9. Should these conditions be regulated or left to market forces?
10. Do any market factors or practical difficulties, including secondary market liquidity and mortgage-backed securities (MBS) investor interest, preclude the development of auto-refi mortgages or one-way ARMs? How would these or similar products impact the MBS market?
11. Should the Bureau amend the ATR-QM rule or other regulations to permit or encourage creditors to offer auto-refi mortgages or one-way ARMs? If so, how?
12. Are there any other new products that creditors could feasibly develop that would allow more borrowers to receive the benefits of reduced mortgage interest rates?
13. Would these products be prohibited or discouraged by existing regulations promulgated by the Bureau?
14. Should the Bureau (or other Federal regulators) amend regulations to permit or encourage the development of these products?
15. Are there other legal impediments or policies that may deter the introduction of auto-refi mortgages, one-way ARMs, or other new products that could facilitate beneficial refinances?
Forbearances and Other Loss Mitigation
1. What are the benefits and drawbacks of automating and streamlining short and long-term loss mitigation offers?
2. If such automation and streamlining of loss mitigation offers is incorporated within new mortgage products:
a. How should such products be structured?
b. How and where should such features be established (e.g., the note, contracts between investors and servicers, or regulations created or amended by the Bureau or other Federal regulators)?
3. Under what circumstances should short or long term loss mitigation solutions be offered automatically? For example, should forbearance be offered automatically upon the declaration of a national emergency or presidentially declared disaster, when unemployment rates in the consumer's locality reach a certain level, when a borrower loses their job, when a co-borrower on the loan dies, or under other circumstances? What factors should be considered regarding these circumstances? Should any documentation from the consumer be required in any of these circumstances?
4. For short-term loss mitigation solutions, such as forbearance, to what extent is there tension between the goal of offering meaningful immediate payment relief and the goal of ensuring that the balance owed does not grow so large as to make long-term loss mitigation solutions difficult to achieve? Should there be a maximum length of a short-term loss mitigation solution and, if so, what is the appropriate maximum length?
5. What impact would the Bureau's mortgage servicing regulations, such as those relating to communications with delinquent borrowers, the Bureau's regulatory definition of delinquency, and the loss mitigation process in general, have on automating and streamlining short and long-term loss mitigation offers?
6. What changes, if any, should be considered relating to the impact that forbearances and other short-term loss mitigation solutions would have on a consumer's credit reporting?
7. Should standards be set to ensure affordability of long-term loss mitigation solutions? If so, what features of a long-term loss mitigation solution would best help ensure long-term affordability? For example, would term extension, limits on monthly payment increases, or principal forgiveness assist with the goal of long-term affordability?
8. When considering the potential automation and streamlining of short and long-term loss mitigation offers, would there be advantages or drawbacks if more creditors retained servicing of the mortgage loans they originate? Do payment relief advantages exist when an original creditor retains servicing of a mortgage loan? If so, should the Bureau consider ways to encourage originators to retain the servicing of mortgage loans?
9. When considering the potential automation and streamlining of short and long-term loss mitigation offers, are there particular issues or would any particular approaches be more effective for certain types of homeowners, such as servicemembers, older adults, and first-time homeowners?
10. Other than the mortgage products already mentioned in this RFI, are there other mortgage products or features of mortgage products that could help borrowers weather various financial shocks? What are the advantages or drawbacks of these mortgage products or features of mortgage products?
11. Are there other options not mentioned in this RFI that could help achieve the goal of reducing risk for homeowners who are facing financial hardship? If so, what are those options?